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Citigroup (C) Q2 Earnings Top Estimates, Revenues Down Y/Y
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Citigroup (C - Free Report) has delivered a positive earnings surprise of 46.4% in second-quarter 2021. Income from continuing operations per share of $2.84 handily outpaced the Zacks Consensus Estimate of $1.94. Also, results compared favorably with 38 cents in the prior-year quarter.
The stock gained 1.6% during the pre-market trading, reflecting investors’ optimism with the results. Notably, the full-day trading session will display a clearer picture.
Citigroup has recorded equity market revenues jump on strong client volumes, driven by stellar derivatives and prime finance performance. However, fixed-income revenues were down due to an exceptionally good quarter last year.
At the same time, investment banking revenues increased, driven by equity underwriting as well as growth in advisory, partially offset by lower revenues in debt underwriting.
However, normalization in market activity in Fixed Income Markets within the Institutional Clients Group (“ICG”), lower average card loans in Global Consumer Banking (“GCB”), and lower interest rates marred results.
Net income was $6.19 billion compared with $1.06 billion recorded in the prior-year quarter.
Revenues Decline, Expenses Flare Up
Revenues were down 12% year over year to $17.47 billion in the June-ended quarter. The top line, nonetheless, surpassed the Zacks Consensus Estimate of $17.36 billion. Lower revenues from all three business segments, ICG, GCB and Corporate/Other, resulted in the decline.
In the ICG segment, revenues were $10.39 billion in the April-June quarter, down 14% year over year. Lower treasury & trade solutions along with corporate lending revenues were partly offset by higher investment banking and equity market revenues.
GCB revenues decreased 7% year over year to $6.82 billion. Lower revenues in North America along with declining average card loans and deposit spreads across all three geographic regions resulted in the decline. Notably, both retail banking and card revenues witnessed declines.
Corporate/Other revenues were $267 million, down 8% from $290 million witnessed in the prior-year quarter.
Operating expenses at Citigroup flared 7% year over year to $11.2 billion. Continued investments in the franchise transformation and other strategic investments resulted in the upsurge. These were partly negated by efficiency savings.
Balance Sheet Improves
At the end of the second quarter, Citigroup’s end-of-period assets totaled $2.33 trillion, up 4% sequentially. Deposits were up 6% from the prior quarter to $1.3 trillion. The company’s loans fell 1% to $677 billion.
Credit Quality: A Mixed Bag
Citigroup’s costs of credit for the June-ended quarter were negative $1.1 billion against $8.2 billion recorded in the year-earlier quarter. This reflected the release of allowance for credit loss reserves, backed by higher portfolio quality and an improved macroeconomic outlook.
Total non-accrual assets decreased 25% year over year to $4.4 billion. The company reported a fall of 1% in consumer non-accrual loans to $1.8 billion. Also, corporate non-accrual loans of $2.6 billion plunged 36%.
Citigroup’s total allowance for loan losses was $19.2 billion at the end of the reported quarter, or 2.88% of total loans compared with $26.3 billion, or 3.87%, recorded in the year-ago period.
Capital Position Solid
At the end of the April-June period, Citigroup’s Common Equity Tier 1 Capital ratio was 11.9%, up from the prior-year quarter’s 11.5%. The company’s supplementary leverage ratio in the reported quarter was at 5.9%, down from 6.6%.
As of Jun 30, 2021, book value per share was $90.86, up 9% year over year, and tangible book value per share was $77.87, up 9%.
Capital Deployment
In the reported quarter, Citigroup repurchased 40 million common shares and returned $4.1 billion to shareholders in forms of common stock repurchases and dividends.
Our Viewpoint
The company delivered impressive results this time around on reduced costs of credit. Solid equity market revenues and equity underwriting business aided the bank despite being unfavorably impacted by lower debt underwriting. The company displays capital strength, reflecting decent liquidity.
One can consider a strong brand like Citigroup to be a sound investment option for the long term, given its global footprint and attractive core business. Nevertheless, rising operating expenses remain concerning for the company.
People's United Financial, Inc. and U.S. Bancorp (USB - Free Report) are scheduled to come out with quarterly numbers on Jul 15, while First Horizon Corporation (FHN - Free Report) is slated to release Q2 numbers on Jul 16.
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Citigroup (C) Q2 Earnings Top Estimates, Revenues Down Y/Y
Citigroup (C - Free Report) has delivered a positive earnings surprise of 46.4% in second-quarter 2021. Income from continuing operations per share of $2.84 handily outpaced the Zacks Consensus Estimate of $1.94. Also, results compared favorably with 38 cents in the prior-year quarter.
The stock gained 1.6% during the pre-market trading, reflecting investors’ optimism with the results. Notably, the full-day trading session will display a clearer picture.
Citigroup has recorded equity market revenues jump on strong client volumes, driven by stellar derivatives and prime finance performance. However, fixed-income revenues were down due to an exceptionally good quarter last year.
At the same time, investment banking revenues increased, driven by equity underwriting as well as growth in advisory, partially offset by lower revenues in debt underwriting.
However, normalization in market activity in Fixed Income Markets within the Institutional Clients Group (“ICG”), lower average card loans in Global Consumer Banking (“GCB”), and lower interest rates marred results.
Net income was $6.19 billion compared with $1.06 billion recorded in the prior-year quarter.
Revenues Decline, Expenses Flare Up
Revenues were down 12% year over year to $17.47 billion in the June-ended quarter. The top line, nonetheless, surpassed the Zacks Consensus Estimate of $17.36 billion. Lower revenues from all three business segments, ICG, GCB and Corporate/Other, resulted in the decline.
In the ICG segment, revenues were $10.39 billion in the April-June quarter, down 14% year over year. Lower treasury & trade solutions along with corporate lending revenues were partly offset by higher investment banking and equity market revenues.
GCB revenues decreased 7% year over year to $6.82 billion. Lower revenues in North America along with declining average card loans and deposit spreads across all three geographic regions resulted in the decline. Notably, both retail banking and card revenues witnessed declines.
Corporate/Other revenues were $267 million, down 8% from $290 million witnessed in the prior-year quarter.
Operating expenses at Citigroup flared 7% year over year to $11.2 billion. Continued investments in the franchise transformation and other strategic investments resulted in the upsurge. These were partly negated by efficiency savings.
Balance Sheet Improves
At the end of the second quarter, Citigroup’s end-of-period assets totaled $2.33 trillion, up 4% sequentially. Deposits were up 6% from the prior quarter to $1.3 trillion. The company’s loans fell 1% to $677 billion.
Credit Quality: A Mixed Bag
Citigroup’s costs of credit for the June-ended quarter were negative $1.1 billion against $8.2 billion recorded in the year-earlier quarter. This reflected the release of allowance for credit loss reserves, backed by higher portfolio quality and an improved macroeconomic outlook.
Total non-accrual assets decreased 25% year over year to $4.4 billion. The company reported a fall of 1% in consumer non-accrual loans to $1.8 billion. Also, corporate non-accrual loans of $2.6 billion plunged 36%.
Citigroup’s total allowance for loan losses was $19.2 billion at the end of the reported quarter, or 2.88% of total loans compared with $26.3 billion, or 3.87%, recorded in the year-ago period.
Capital Position Solid
At the end of the April-June period, Citigroup’s Common Equity Tier 1 Capital ratio was 11.9%, up from the prior-year quarter’s 11.5%. The company’s supplementary leverage ratio in the reported quarter was at 5.9%, down from 6.6%.
As of Jun 30, 2021, book value per share was $90.86, up 9% year over year, and tangible book value per share was $77.87, up 9%.
Capital Deployment
In the reported quarter, Citigroup repurchased 40 million common shares and returned $4.1 billion to shareholders in forms of common stock repurchases and dividends.
Our Viewpoint
The company delivered impressive results this time around on reduced costs of credit. Solid equity market revenues and equity underwriting business aided the bank despite being unfavorably impacted by lower debt underwriting. The company displays capital strength, reflecting decent liquidity.
One can consider a strong brand like Citigroup to be a sound investment option for the long term, given its global footprint and attractive core business. Nevertheless, rising operating expenses remain concerning for the company.
Citigroup Inc. Price, Consensus and EPS Surprise
Citigroup Inc. price-consensus-eps-surprise-chart | Citigroup Inc. Quote
At present, Citigroup carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Earnings Date of Other Banks
People's United Financial, Inc. and U.S. Bancorp (USB - Free Report) are scheduled to come out with quarterly numbers on Jul 15, while First Horizon Corporation (FHN - Free Report) is slated to release Q2 numbers on Jul 16.