Why Citigroup shares fell 16% last month

What happened

Shares of Citigroup (NYSE:C) fell last month as the stock stumbled a report in The Wall Street Journal that regulators were preparing to censure the bank for failing to improve its risk management. The news added to the company’s challenges in a year it has been hit hard by the coronavirus pandemic.

According to data from S&P Global Market Intelligence, the stock ended September down 16%. As you can see from the chart below, most of these losses occurred during a two-day period in the middle of the month after the report of the Newspaper.

VS given by Y-Charts

So what

Before the stock’s fall, Citigroup’s biggest monthly news came on September 10, when the bank announced that CEO Michael Corbat would step down early next year. His replacement, Jane Fraser, will be the first woman to become CEO of a big bank .

Michael Corbat, CEO of Citigroup.

Michael Corbat, CEO of Citigroup. Image source: Citigroup

Early the following week, the company gave an updated third-quarter guidance at an industry conference. He said revenue growth would be high single digits, much better than analysts’ expectations. He also said loan loss reserves would be significantly lower than in the first half.

This good news was overshadowed by the Newspaper report, which said the Federal Reserve and the Office of the Comptroller of the Currency should reprimand the bank. The reprimand was to come in the form of a consent order over weak risk management controls, as evidenced by the bank’s recent $900 million accidental payment to Revlonthe creditors. It was unclear whether the citation would include fines.

Later in the month, the stock fell further on reports that the Federal Reserve would maintain restrictions on dividend increases and stock buybacks for big banks, which it did at the end of the month. month.

Now what

Citi will have a chance to turn the tide when it reports third quarter results next week, October 13. Analysts expect revenue to fall 7.7% to $17.1 billion, despite the company’s revenue forecast. Analysts also see earnings per share falling from $2.07 a year ago to $0.84.

Citigroup is down 44% this year, and given the uncertainty surrounding the coronavirus pandemic and the low interest rate environment for the next few weeks, it will be difficult for the stock to recoup those losses.

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