David Henry, Manya Saini

NEW YORK (Reuters) – Citigroup Inc (NYSE) reported a 46% drop in its first quarter profit Thursday. This was due to provisions for Russia-related losses and a decline in underwriting fees.

Citi, one of America’s most international banks, increased its reserve by $1.9 billion in quarter three to protect itself from losses due to Russia exposures.

Credit costs rose to $755million, in contrast with the $2.1billion benefit that was granted a year prior when the COVID-19 epidemic ended.

It said that it has reduced Russia’s exposure to its bank to $7.8 billion from the $9.8billion reported in December. It would lose $3 billion if the conflict develops from a highly adverse scenario. This is down nearly $5 billion from last month.

The quarter ending March 31 saw net income drop to $4.30 Billion or $2.02 Per Share, from $7.94Billion or $3.62 Per Share one year earlier.

Refinitiv IBES data shows that analysts expected an average profit of $1.55 for each share.

Revenue fell to $19.2B, or 2%.

The main reason was the 43% drop in investment banking revenues. This is because last year’s rush to deal with blank-check companies has tapered off and dried up underwriting fees.

Due to increased net interest income and fee growth, revenue from Treasury and Trade Solutions — Citi’s most important business – rose 18%

Jane Fraser, chief executive officer of Jane Fraser announced the results. Jane Fraser stated that the “geopolitical and macro environments have become more volatile” she is executing her strategy.

Fraser will be leading a overhaul of Citi. Citi is lagging behind peers financially and needs to comply with U.S. bank regulators’ orders.

However, this push has driven up expenses, with costs rising 10% for the quarter, except those related to divestitures in Asia.

BUYBACKS

Citi uses any extra capital it has to buy back shares. Citi’s stock is traded at a discount relative to its net worth. This makes buybacks appealing.

This quarter saw the bank return $4 billion to shareholders, with $1 billion in dividends. The bank’s share count fell 6% compared to a year ago.

Citi suffered from unrealized loss on securities due to the recent increase in interest rates. The reason for these repurchases was Citi’s capital account.

The bank’s Common Equity Tier 1 capital ratio dropped to 11.4%, from 12.2% December. It stated that it will bring the ratio up to 12% before year’s end.

A similar decline was reported by JPMorgan Chase & Co (NYSE:) on Wednesday, deepening concerns among investors that bank buybacks would be constrained this year.