In August last year, Citi accidentally sent $893m to creditors of a syndicated loan to US beauty firm Revlon, for which it was acting as the administrative agent.
The bank said this was due to an operational error and within 24 hours had requested creditors to return the funds. However, it was only able to recover $400m, leaving almost $500m outstanding.
In a mid-February ruling, a federal judge ruled that under New York law creditors were entitled to keep the funds. He said the creditors would have had good reason to believe the payment from Citi was intentional, remarking: “To believe that Citibank, one of the most sophisticated financial institutions in the world, had made a mistake that had never happened before, to the tune of nearly $1bn, would have been borderline irrational.”
As a result, in a February update to its fourth-quarter 2020 earnings, which had been released in mid-January, Citi said it was retrospectively adjusting down its results due to “operational losses related to certain legal matters”.
Fourth-quarter earnings were revised down by $323m from $4.6bn to $4.31bn, a 13% decrease from the year before.
The change means Citigroup’s earnings per share (EPS) for the period was also revised down from $2.08 to $1.92.
According to data on Yahoo! Finance, analysts estimate EPS for Citigroup at an average of $2.01 for the first quarter in 2021 and $1.71 for the second quarter of 2021, with revenues of $17.98bn and $17.39bn, respectively. That would place Citi’s first-quarter net income still roughly $1.9bn higher than the first quarter of 2020, at the beginning of the pandemic.
Citigroup performed in the middle of the pack compared with its peers over recent quarters. JPMorgan topped the fourth quarter earnings table with $12bn in net income for the quarter, compared with Citi’s $4.31bn. Bank of America and Goldman Sachs both outperformed Citi on fourth quarter net income.
