Citigroup Inc beat Wall Street profit estimates on Monday as lower expenses offset a drop in quarterly revenue, stemming from year-end volatility in its fixed-income trading business.

Citi is the first of the major US banks to report fourth-quarter results. Wall Street majors JPMorgan Chase & Co, Bank of America Corp and Goldman Sachs will report later this week.

Citi officials also said they had yet to see an effect on business from a partial US shutdown but that could change if the shutdown continues.

Excluding a one-time tax related gain, quarterly profit rose to $4.2 billion, or $1.61 a share, in the quarter ended Dec. 31, from $3.7 billion, or $1.28 a share, a year earlier. Analysts had expected a profit of $1.55 per share, according to IBES data from Refinitiv.

Shares of the third-largest US bank rose 2.8 percent to $58.29 in mid-morning trading.

But revenue in Citi’s markets and securities business fell 21 percent in the fourth quarter, with the bank citing widening credit spreads and the market correction in December.

Banks with big trading businesses benefit when markets move, because it prompts customers to buy and sell securities. But sudden bursts of volatility can be damaging, leading customers to avoid trading and also hurting banks’ ability to hedge their own market exposures.

Overall revenue fell 2 percent to $17.1 billion, below Wall Street expectations of $17.6 billion, according to IBES data from Refinitiv.

The bank said it reduced compensation costs as markets revenue lagged and that overall expenses declined 4 percent from a year-earlier.

In fixed-income markets, Chief Financial Officer John Gerspach said that for much of the quarter corporate and investor clients “remained on the sidelines, waiting for some clearer market conditions."

Stock markets gyrated wildly in December and yield spreads, or the additional premium investors demand for holding corporate bonds over safer U.S. Treasury securities, also widened significantly in the fourth quarter as investors globally sharply retreated from risky investments.

The revenue decline hurt Citigroup’s effort to hit an efficiency target set by Chief Executive Officer Michael Corbat, though it exceeded his goal for returns on tangible common equity (ROTCE).

The bank reported an efficiency target of 57.4 percent for 2018, just shy of Corbat’s 57.3 percent goal. Its ROTCE of 10.9 percent last year was above the 10.5 percent target.

A lower efficiency ratio means a bank is better at managing its costs relative to revenue, while ROTCE is a widely watched measure of how well a bank uses shareholder money to generate profits.

Investors have been pushing Citigroup to prove it can grow revenue and profits, rather than simply returning capital through share buybacks. Skepticism over its potential to grow its underlying businesses hangs over its share price, with Citi trading at a lower valuation than rival U.S. banks.

Last week the bank signed a deal with one of its largest shareholders, ValueAct, granting the activist investor more access to its board.

Citigroup’s costs fell 4 percent as the bank wound down legacy assets and benefited from lower compensation costs related to the market downturn.

Earnings per share were also boosted by an 8 percent decline in outstanding stock as Citigroup bought back 74 million of its own shares.

Even though Citigroup returned more than 100 % of its annual earnings through dividends and stock buybacks, the stock is still trading below tangible book value, Oppenheimer analyst Chris Kotowski noted in a report after Citi’s earnings release.

This story has been published from a wire agency feed without modifications to the text.

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