Citigroup beats 4th-quarter forecasts as its fixed income trading group delivers record results

• Citigroup reported fourth-quarter earnings and revenue that beat estimates on Friday.
• The bank's fixed-income trading unit delivered record results as it benefited from a higher interest rate environment.
• The bank increased its provisions for loan losses due to expectations of a shaky economy.

Citigroup gave upbeat guidance and reported fourth-quarter earnings that beat analyst estimates on Friday, driven by record results from the bank's fixed-income trading unit.

For 2023, the bank estimated that it will generate between $78 billion and $79 billion in revenue, which is higher than analyst estimates of $76 billion.

In the fourth quarter, Citi's $3.16 billion in revenue from its fixed income sales and trading division beat analyst estimates for $2.81 billion and represented year-over-year growth of 31% as higher interest rates drove more business.

Meanwhile, equities sales and trading revenue of $789 million was down 14% year-over-year and missed analyst estimates of $930.6 million. Investment banking revenue fell 58% to $645 million, well below analyst estimates for $722.4 million. Both units were hurt by a continued sell-off in the stock market and a lack of IPO activity, respectively.

Shares of Citigroup initially sold-off more than 2% following the release of its results, but then turned 1% higher.

Here are other key numbers:

Revenue: $18.01 billion, versus the average analyst estimate of $17.96 billion
Earnings per share: $1.16, versus the average analyst estimate of $1.14
Total Deposits: $1.37 trillion, versus analyst estimates of $1.28 trillion

Citigroup CEO Jane Fraser said the bank has made "significant progress" in its strategic plan to simplify its business and strengthen its five key underlying businesses.

"We intentionally designed a strategy that can deliver for our shareholders in different environments, and we are very much on track to reach the medium-term return targets we shared on Investor Day," Fraser said.

Citigroup said a souring global economy is leading it to increase its provisions for loan losses to $1.8 billion, compared to last year when the bank was releasing old reserves. Net loan charge-offs rose 36% year-over-year to $1.2 billion, which was ahead of estimates of $1.1 billion.

The company's total allowance for credit losses on loans was $17.0 billion in the quarter, with a reserve-to-funded loans ratio of 2.60%. That compares to last year's allowance for credit losses of $16.5 billion.

Also on Friday, JPMorgan beat its earnings estimates but CEO Jamie Dimon warned investors of an increasingly dark macro environment.