Total profits at Citigroup (NYSE:C) in the first quarter of 2020 tumbled 46% year over year as the bank braces for higher loan losses as a result of the novel coronavirus pandemic.
The results are in line with other large banks that have reported earnings so far. JPMorgan Chase saw profits drop nearly 69%, Wells Fargo saw a drop of 89%, and Bank of America saw a decline of 45%.
Citi reported net income of $2.5 billion in the first quarter, representing $1.05 per diluted share. Revenue in the quarter was $20.7 billion, up 12% on a year-over-year basis.
The main detraction from earnings was an increase of $4.9 billion in the credit provision, an expense that banks set aside to add to their pool of reserves they use to cover loan losses.
"COVID-19 is a public health crisis with severe economic ramifications. All of the work we have done in recent years has put us in a very strong position from a capital, liquidity and balance sheet perspective," Citi's CEO, Michael Corbat, said in a statement.
The bank's earnings were also heavily impacted by the implementation of the current expected credit loss (CECL) accounting method, which requires banks to forecast losses on the life of a loan as soon as it is originated. The policy just went into effect on Jan. 1 and resulted in a $4.1 billion increase in the company's total reserves.
That, coupled with the new provision build this quarter forecasting for coronavirus-related losses, sent the total allowance for loan losses to $22.8 billion, up more than $10.5 billion year over year.