Citigroup Inc (C.N) posted $2.32 billion of charges for layoffs and lawsuits in the first financial report under its new chief executive, Michael Corbat, who cautioned that the bank needs more time to deal with the problems it faces.
Even with the charges, Citi on Thursday reported a higher fourth-quarter profit as trading revenue rebounded. But the result was well below Wall Street expectations, and the company's shares were down 3.2 percent in afternoon trade.
"We are not satisfied with these bottom line earnings," Corbat told a conference call with analysts, the first time he has addressed them publicly since becoming CEO.
Asked what he would consider a mark of success for Citigroup's turnaround, Corbat said: "We've got to get to a point where we stop destroying our shareholders' capital."
Corbat, who took the reins in mid-October after predecessor Vikram Pandit was ousted, said in a statement earlier on Thursday that Citi's various businesses were combating competitive and regulatory problems, as well as issues dating to the financial crisis that continue to plague the bank and its peers.
"It will take some time to work through the challenges of the current environment," he said, adding that the bank's "critical goals" include improving its return on assets.
Citi shares rose in Corbat's first three months as CEO, outpacing peers, as some investors welcomed Pandit's departure and anticipated changes in the bank's structure. But analysts said estimates of future earnings are likely to be revised based on what the bank reported on Thursday.
The quarter "falls way short of expectations" on two issues - higher-than-expected legal costs and no significant release of reserves for bad loans, Nomura analyst Glenn Schorr said in a note to clients.
There was relatively little in the way of 2013 outlook, though Chief Financial Officer John Gerspach did tell analysts that the bank expected interest margins to be steady in 2013 relative to 2012. Bank investors have had a close eye on margins of late over fears that falling interest rates could crimp the profitability of lending.
Fourth-quarter net income was $1.2 billion, or 38 cents a share, compared with $956 million, or 31 cents a share, in the same quarter of 2011.
Revenue from fixed income markets increased 58 percent, driving Citi's Securities and Banking segment back to profitability. Company-wide revenue, adjusted for certain items, increased 8 percent, while operating expenses were unchanged.
Results were reduced by new legal costs of $1.29 billion, or 27 cents a share, and a previously announced corporate restructuring charge of $1.03 billion, or 21 cents a share.
Gerspach said $500 million of the new legal costs came from what he called a variety of issues in the ongoing U.S. consumer banking business. He later added he expected legal costs to remain "somewhat elevated."
Expenses recorded for changes in the value of some of the bank's debt and obligations of derivatives counterparties were 10 cents a share, compared with 1 cent a year earlier.
Excluding the many one-time items, Citi said it earned 69 cents per share. On that basis, analysts polled by Thomson Reuters I/B/E/S on average expected 96 cents per share.
The operating earnings were 15 cents below the lowest of the 22 estimates that comprised the consensus forecast. It is the third year in a row that the bank's fourth-quarter results have missed Wall Street forecasts by at least 20 percent, according to Thomson Reuters data.
Citi shares were down $1.35 to $41.13 in Thursday afternoon trading following the results. Through Wednesday's close, the shares had risen 16 percent in the three months since Corbat became CEO, against a 6 percent rise for the KBW banks index .BKX.