Citigroup Affected by Lower Fixed Interest and Equity Trading in Fourth Quarter Earnings

Citigroup (NYSE:C) kicks off fourth quarter earnings with the other major money center banks along with the world’s largest investment management company. C is in the process of exiting its consumer banking business in 13 markets JPMorgan Chase (NYSE: JPM) and Wells Fargo (NYSE: WFC) are also reporting on Friday along with BlackRock (NYSE: BLK). The earnings come after a week that has seen many banks stocks hit 52-week highs.

Citigroup

Citigroup Q4 2021 

Q4 2021 earnings before the open; conference call at 11 a.m. ET Friday

  • Adjusted earnings of $1.99 a share Projected EPS: $1.71
  • $16.85 billion in revenue. Projected revenue: $16.92 billion
  • Unadjusted net income was $3.2 billion, 26% drop from a year-ago on the increase in expenses, which rose 18% to $13.5 billion in the quarter.
  • Revenue from fixed income was $2.5 billion below analysts’ expectations of $2.83 billion
  • Revenue from equity markets trading was $785 million billion and $866.7 million.

Citigroup CEO Jane Fraser said in a statement that the bank had a “decent end to 2021 driving net income for the year up to $22 billion in what was a far better credit environment than the previous year.”

Shares of Citigroup have been lagging behind other bank stocks. Since January 2021, C is down 1.69%) at $66.21 a share. Citigroup is currently undergoing changes under the leadership of Chief Executive Officer Jane Fraser and is in the process of exiting its consumer banking business in 13 markets around the world, a process that is expected to provide the bank with $7 billion in cash. Citi now operates consumer banking solely from 4 wealth centers: Singapore, Hong Kong, UAE, and London.

However, the exits from Australia and South Korea have not been smooth and cost Citigroup nearly $1.7 billion. Another black mark was Citigroup’s Board of Directors approved incentives that could see three executives in the bank earn up to $5 million in compensation based on the transformation’s success.

The stock has risen 12.6% since the company last reported earnings on Jan. 15.

C Third Quarter 2021 Earnings Report

Bank Release Schedule

  • JPMorgan Chase, Citi and Wells Fargo report earnings on Friday. The world’s largest asset manager BlackRock (BLK) also reports.
  • US Bancorp and Bank of America release their earnings on Wednesday, January 19 with investment banking powerhouse Morgan Stanley.
  • Goldman Sachs is due to report earnings on Tuesday, January 18.

The earnings come after a week that has seen many banks stocks hit 52-week highs. The Invesco KBW Bank ETF, which has Bank of America, Wells Fargo, JPMorgan Chase, US Bancorp and Citigroup as its top holdings, is up over 8% already this year and more than 19% in the past six months. Fourth-quarter corporate earnings likely benefited from this firming economic backdrop.

Friday Earnings Reports

Wells Fargo Q4 2021

Wells Fargo has been the top-performing stock among U.S. lenders over the past year, up over 60% to $54.67. With the seemingly endless major scandal involving fake accounts behind it and a new management team in place, Wells Fargo has been gaining support. $WFC has risen around 11% in the past month alone. 

  • Q4 2021 earnings before the bell; conference call at 10 a.m. ET Friday
  • Projected EPS: $1.10
  • Projected revenue: $18.67 billion

Overall, analysts and banks are looking for a strong earnings season, partly in response to the improving economy and the vaccine rollout but predominantly from the rise in interest rates with the Fed looking to raise rates. Banks will benefit from rising rates, provided that they don’t go up too rapidly and hurt demand for mortgages, credit cards and other loans.

There is that reputational risk hangs over the bank after a series of scandals that included creating fake customer accounts.

WFC  Third Quarter 2021 Earnings Report  

The brighter outlook for bank profits coincides with higher in Treasury yields. The benchmark 10-year Treasury yield has risen by over 70 basis points for the year-to-date, with higher interest rates boosting banks income from their core lending businesses.  Big banks’ fourth-quarter results should get another boost from trading activity, given the stock markets record-setting rally and volatility in the bond markets. Fixed-income trading revenues have risen in the past year by the most in at least a decade across the bond trading divisions at Goldman Sachs, Citi, Morgan Stanley, JPMorgan and Bank of America. 

JPMorgan Q4 2021

  • Q4 2021 earnings before the open; conference call at 8:30 a.m. ET Friday
  • Projected EPS: $3.00
  • Projected revenue: $29.85 billion

JPMorgan Chase $JPM, America’s largest bank kick off the banking sector’s Q4 22 earnings season on Friday before the market opens with expectations for strong earnings. Last quarter JP Morgan blew away consensus expectations on both profits and revenues.

JPM currently has total assets of nearly $4 trillion and remains the biggest bank in the world by market capitalization at $490.7 billion. JPMorgan Chase in December was fined $200 million by regulators for several “bookkeeping failures” and for letting employees use personal communications devices to send texts and emails about sensitive company business and evade authorities.

JPMorgan Chase & Co. (JPM) is expected to report revenues of $29.8 billion and earnings per share (EPS) of $2.98, based on a FactSet survey of 21 analysts.

 JPM Third Quarter 2021 Earnings Report

The bank rally has been extended this year by expectations for the rise in rates not impacting the economy reopening and infrastructure spending.  The new surge in home prices has also buoyed optimism for the mortgage business and banks’ profits thereto.

BlackRock Q4 2021

  • Q4 2021 earnings before the bell; conference call at 8:30 a.m. ET Friday
  • Projected EPS: $10.10
  • Projected revenue: $5.12 billion

BlackRock income from its ETF and investment management income continues to soar being the largest investment management company in the world with assets under management of $9.5 trillion as of October 2021. In the past 12 months, BlackRock stock has risen about 21% higher to its current price of $889.48 a share.

BlackRock recently announced that it is pulling $2 trillion of assets that had been managed by State Street (NYSE:STT). BlackRock says it will reduce its reliance on a single outside investment manager and help to lower its costs for back-office workers. BlackRock said it plans to move the administrative and accounting tasks that State Street had performed to other lenders, such as Citigroup and Bank of New York Mellon Corp. (NYSE:BK).

Blackrock Third Quarter 2021 Earnings Report

Source: JPM, WFC, C, BLK,

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