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Citigroup started off the banking sectors Q2 earnings season before the market open Monday with better than expected results. $C report ahead of other money center banks Bank of America $BAC JPMorgan Chase $JPM, Wells Fargo $WFC, PNC Financial $PNC and Goldman Sachs.

Citigroup

Citigroup Inc NYSE: C · Report Before Open Monday

$1.95 Beat $1.80 EPS Forecast And $18.75 Beat $18.52 billion Forecast in Revenue

Earnings

Citgroup posted profit of $4.79 billion, or $1.95 per share, compared with the $1.80 estimate of analysts. Excluding the impact of the electronic bond trading platform Tradeweb IPO, the bank would have posted $1.83 per share in profit, fueled by lower taxes and a reduction in the number of outstanding shares. Revenue of $18.76 billion exceeds the $18.5 billion estimate, thanks to a $350 million pretax gain on the Tradeweb IPO.

Analyst Forecast

  • Citigroup is one of the least rate sensitive banks of the majors has said a 25-basis point rate shift would cut revenue by $50 million per quarter.
  • 2Q EPS estimate $1.80 (range $1.70 to $1.88)
  • 2Q adjusted revenue estimate $18.52 billion (range $18.01 billion to $19 billion)
  • 4Q equities trading revenue estimate $830.7 million (Bloomberg MODL, 7 ests.)
  • FICC $3.01 billion (7 ests.)
  • I-banking revenue est. $1.26 billion
  • 2Q Preview Call 10am 866 516-9582 password: 1879538

Analysts focus on the bank’s cost-ratio outlook for 2019. With the recent market turmoil there will be eyes on variables including geopolitics, loan growth, capital markets revenue and expense outlooks. 

Given that, in the conference call management’s take on the economy, global economic growth and the health of capital markets will be scrutinized. Indications about card margins and growth in North America retail banking with updates on the firm’s national digital bank and its growth prospects in Mexico and Asia are all key data points. Given the market risks and the Fed's so called more flexible policy look for investment banking pipeline talk and credit quality.

Citigroup Inc NYSE: C

Market Reaction Pre-market $71.91 USD +0.14 (0.20%)

Highlights

  • Equity trading revenue fell 9% to $790 million.
  • Fixed-income revenue rose 8% to $3.32 billion, but excluding the Tradeweb transaction, the bank would have posted a 4% decline in the Fixed income division.
  • Investment banking revenue dropped 10% to $1.28 billion.
  • The bank cut companywide expenses 2% to $10.5 billion
  • Citi's efficiency ratio improved to 56% from 58% a year ago. That beat the 57.3% estimate of analysts.
  • Global consumer bank revenue rose 3% to $8.5 billion as profit climbed 11% to $1.41 billion, compared to the $1.49 billion estimate of analysts surveyed by Factset. Allowance for loan losses was $12.5 billion, or 1.82% of total loans at quarter-end compared to $12.1 billion, or 1.81% of total loans last year.
  • Corporate/Other revenues grew 1% to $532 million, as higher treasury revenues and gains were largely offset by the wind-down of legacy assets

Citigroup Q2 2019 Earnings

End-of-period loans increased 3% to $689 billion from last year both on a reported and constant dollar basis. The constant-dollar increase was driven by a 4% aggregate growth in the ICG and GCB segments. End-of-period deposits were $1 trillion as of quarter-end, up 5% versus the prior-year period on both a reported and constant dollar basis. The constant-dollar growth was aided by a 6% increase in ICG and a 3% growth in GCB.

Citigroup Inc Q1 Earnings Recap

$1.87 Beat $1.80 EPS Forecast With $18.60B Missing $18.65 billion forecast in revenue

Earnings

Citigroup Inc. (NYSE: C) reported earnings per share of $1.87, besting estimates set at $1.80 per share, and posted revenue of $18.6B increased 8% Q/Q and nearly in line with the  $18.65 billion consensus. Q1 net income of $4.71B increass from $4.31B, or $1.65 per share, in Q4 2018 and $4.62B, or $1.68 per share in Q1 2018. Earnings per share of $1.87 were largely was driven by a lower effective tax rate, which was reported at 21% in the current quarter compared to 24% in the first quarter of 2018 and also largely due to the extensive stock buybacks that Citigroup has completed over the past year to reduce the number of outstanding shares.

Analysts focus on the bank’s cost-ratio outlook for 2019. With the recent market turmoil there will be eyes on variables including geopolitics, loan growth, capital markets revenue and expense outlooks. In early December Chief Financial Officer John Gerspach cautioned that volatility may hinder 2018 targets.

Given that, in the conference call management’s take on the economy, global economic growth and the health of capital markets will be scrutinized. Indications about card margins and growth in North America retail banking with updates on the firm’s national digital bank and its growth prospects in Mexico and Asia are all key data points. Given the market risks and the Fed's so called more flexible policy look for investment banking pipeline talk and credit quality.

Bank stocks have rallied so far in 2019 after a dismal 2018.

Citigroup Inc NYSE: C

Market Reaction Pre-market $67.12 −0.30 (0.44%)

Highlights

"Our earnings reflect the progress we are making to improve our return on and return of capital. Both our consumer and institutional businesses performed well and we saw good momentum in those areas where we have been investing, such as U.S. Branded Cards, Treasury and Trade Solutions, and Investment Banking," CEO Michael Corbat said. "Importantly, our strategy in North America consumer banking is showing good early results as we introduce new products and engage with a broader range of customers, through digital channels."

Corbat said Citi focused on returning capital to shareholders so far in 2019.

"We returned over $5 billion to our shareholders during the quarter, contributing to the 11% increase in our earnings per share from a year ago," Corbat said. "We further reduced our common shares outstanding, down 9% from a year ago, while maintaining our Common Equity Tier 1 Capital Ratio at 11.9%."

  • The bank repurchased 66 million shares totaling about $4.06 billion in the first quarter and returned $1.08 billion to shareholders through dividends.
  • Equity-trading revenue saw a 24% decline in the first quarter due to lower market volumes and client financing balances
  • Global Consumer Banking revenue of $8.45B, essentially unchanged Q/Q and Y/Y.
  • Institutional Clients Group revenue of $9.69B, up 8% Q/Q, down 2% Y/Y.
  • Corporate/Other revenue of $431M, down 8% Q/Q and down 27% Y/Y.
  • Q1 provision for credit losses and for benefits and claims of $1.98B vs. $1.93B in Q4 and $1.86B in Q1 2018.
  • Common equity tier 1 capital ratio of 11.9% vs. 11.86% in Q4 and 12.05% in Q1 2018.
  • Tangible book value per share of $65.55 at March 31, 2019 vs. $63.79 at Dec. 31, 2018.

Mixed results did show an improved efficiency ratio, better expense control, higher-than-expected fixed-income revenue and strong results from the Mexico and Latin America business.

 

Caution hangs over the sector as auto and student loans also overhang the banking and finance sectors.  The new fall in home prices has challenged optimism for the mortgage business and banks profits thereto.

Source: Citigroup

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