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What's in the Cards for Citigroup (C) This Earnings Season?
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Citigroup (C - Free Report) is scheduled to report first-quarter 2022 results on Apr 14, before market open. Its revenues and earnings are expected to have declined year over year.
In the last reported quarter, the company’s earnings surpassed the Zacks Consensus Estimate on strong results in the investment banking (IB) segment driven by equity underwriting and growth in advisory revenues. However, fixed-income revenues were down due to declining rates and spread products.
Over the trailing four quarters, the company’s earnings surpassed the consensus estimate on all four occasions, the surprise being 30.8%, on average.
Net Interest Income (NII): In the first quarter, recovery in the consumer lending backdrop continued to aid loan growth for banks. Per the Fed’s latest data, there was notable strength in both commercial and consumer lending, including credit cards, commercial and industrial loan, and residential and commercial real estate loans in January and February. These are likely to have driven loan growth for C.
The Zacks Consensus Estimate for C’s average interest-earnings assets is pegged at $2.18 billion, suggesting a marginal increase from the prior quarter’s reported figure.
While the Fed increased rates in mid-March, interest rates remained low for the majority of the first quarter. This and fewer days during the quarter are likely to have hindered net interest margin and NII.
The Zacks Consensus Estimate for NII of $10.76 billion suggests a marginal decline from the prior-year quarter’s reported figure.
Markets Revenues: Due to the Russia-Ukraine conflict, implied interest rates, FX and commodity volatility spiked up in the last month of the quarter. This is likely to have set the stage for robust interest rates, commodities and FX product volumes. However, the credit business remained under pressure due to spread widening and lower volumes. Hence low client activity and unfavorable market conditions are expected to have affected Citigroup’s Markets revenues. The bank expects to see a 10% year-over-year decline in its Markets revenues in the first quarter.
IB Fees: Deal-making considerably reduced in first-quarter 2022. Also, a fall in investment banking activity due to subdued capital markets and a decline in equity and debt issuance deal volume were seen. High market volatility, triggered by the Ukraine crisis, and uncertainty regarding an economic slowdown tied to inflation created headwinds in the March quarter for C’s IB fees.
Expenses: Management has been focused on revamping its underlying technology, risk management and internal controls as part of remediation highlighted by the Office of the Comptroller of the Currency and the Federal Reserve. The company has been investing in businesses like wealth management, IB and treasury and trade solutions.
Hence, as Citigroup continued to ramp up its transformation efforts, investments in front-office expansions and modernization during the first quarter, expenses are expected to have increased. Management expects expenses to rise 10-12% in the quarter, excluding 2022 divesture impacts.
Key Developments During the Quarter
Citigroup announced the sale of its consumer banking franchise in Bahrain, Taiwan,Indonesia, Malaysia, Thailand, Vietnam and India. It will also be retracting its entire business from Russia.C also plans to exit the consumer, small business and middle-market banking operations of Citibanamex in Mexico as part of its strategic refresh.
In February, Citigroup noted it will completely terminate overdraft fees, return item fees and overdraft protection fees by this summer, making it the largest U.S. lender to do so.
What Our Model Predicts
Our proven model does not predict an earnings beat for C this time around. This is because it does not have the right combination of the two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — for increasing the odds of an earnings beat.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: The Earnings ESP for Citigroup is -5.30%.
Zacks Rank: Citigroup currently carries a Zacks Rank of 3.
Prior to the first-quarter earnings release, the company is witnessing downward estimate revisions, indicating the bearish sentiments of analysts. The Zacks Consensus Estimate for first-quarter earnings has been revised 4% downward to $1.93 over the past week. Also, the figure suggests a year-over-year decline of 46.7%.
The Zacks Consensus Estimate for revenues of $18.01 billion indicates a 6.8% decline from the prior-year quarter’s reported figure. For the first quarter of 2022, Citigroup expects a mid-single-digit decline in total revenues, excluding divestiture impacts.
Stocks That Warrant a Look
Associated Bancorp (ASB - Free Report) , M&T Bank (MTB - Free Report) and State Street (STT - Free Report) are a few banking stocks that you might want to consider as these have the right combination of elements to post an earnings beat in their upcoming releases, per our model.
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What's in the Cards for Citigroup (C) This Earnings Season?
Citigroup (C - Free Report) is scheduled to report first-quarter 2022 results on Apr 14, before market open. Its revenues and earnings are expected to have declined year over year.
In the last reported quarter, the company’s earnings surpassed the Zacks Consensus Estimate on strong results in the investment banking (IB) segment driven by equity underwriting and growth in advisory revenues. However, fixed-income revenues were down due to declining rates and spread products.
Over the trailing four quarters, the company’s earnings surpassed the consensus estimate on all four occasions, the surprise being 30.8%, on average.
Citigroup Inc. Price and EPS Surprise
Citigroup Inc. price-eps-surprise | Citigroup Inc. Quote
Factors at Play
Net Interest Income (NII): In the first quarter, recovery in the consumer lending backdrop continued to aid loan growth for banks. Per the Fed’s latest data, there was notable strength in both commercial and consumer lending, including credit cards, commercial and industrial loan, and residential and commercial real estate loans in January and February. These are likely to have driven loan growth for C.
The Zacks Consensus Estimate for C’s average interest-earnings assets is pegged at $2.18 billion, suggesting a marginal increase from the prior quarter’s reported figure.
While the Fed increased rates in mid-March, interest rates remained low for the majority of the first quarter. This and fewer days during the quarter are likely to have hindered net interest margin and NII.
The Zacks Consensus Estimate for NII of $10.76 billion suggests a marginal decline from the prior-year quarter’s reported figure.
Markets Revenues: Due to the Russia-Ukraine conflict, implied interest rates, FX and commodity volatility spiked up in the last month of the quarter. This is likely to have set the stage for robust interest rates, commodities and FX product volumes. However, the credit business remained under pressure due to spread widening and lower volumes. Hence low client activity and unfavorable market conditions are expected to have affected Citigroup’s Markets revenues. The bank expects to see a 10% year-over-year decline in its Markets revenues in the first quarter.
IB Fees: Deal-making considerably reduced in first-quarter 2022. Also, a fall in investment banking activity due to subdued capital markets and a decline in equity and debt issuance deal volume were seen. High market volatility, triggered by the Ukraine crisis, and uncertainty regarding an economic slowdown tied to inflation created headwinds in the March quarter for C’s IB fees.
Expenses: Management has been focused on revamping its underlying technology, risk management and internal controls as part of remediation highlighted by the Office of the Comptroller of the Currency and the Federal Reserve. The company has been investing in businesses like wealth management, IB and treasury and trade solutions.
Hence, as Citigroup continued to ramp up its transformation efforts, investments in front-office expansions and modernization during the first quarter, expenses are expected to have increased. Management expects expenses to rise 10-12% in the quarter, excluding 2022 divesture impacts.
Key Developments During the Quarter
Citigroup announced the sale of its consumer banking franchise in Bahrain, Taiwan,Indonesia, Malaysia, Thailand, Vietnam and India. It will also be retracting its entire business from Russia.C also plans to exit the consumer, small business and middle-market banking operations of Citibanamex in Mexico as part of its strategic refresh.
In February, Citigroup noted it will completely terminate overdraft fees, return item fees and overdraft protection fees by this summer, making it the largest U.S. lender to do so.
What Our Model Predicts
Our proven model does not predict an earnings beat for C this time around. This is because it does not have the right combination of the two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — for increasing the odds of an earnings beat.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: The Earnings ESP for Citigroup is -5.30%.
Zacks Rank: Citigroup currently carries a Zacks Rank of 3.
Prior to the first-quarter earnings release, the company is witnessing downward estimate revisions, indicating the bearish sentiments of analysts. The Zacks Consensus Estimate for first-quarter earnings has been revised 4% downward to $1.93 over the past week. Also, the figure suggests a year-over-year decline of 46.7%.
The Zacks Consensus Estimate for revenues of $18.01 billion indicates a 6.8% decline from the prior-year quarter’s reported figure. For the first quarter of 2022, Citigroup expects a mid-single-digit decline in total revenues, excluding divestiture impacts.
Stocks That Warrant a Look
Associated Bancorp (ASB - Free Report) , M&T Bank (MTB - Free Report) and State Street (STT - Free Report) are a few banking stocks that you might want to consider as these have the right combination of elements to post an earnings beat in their upcoming releases, per our model.
The Earnings ESP for Associated Bancorp is +3.72% and the company carries a Zacks Rank #2 (Buy) at present. ASB is slated to report first-quarter 2022 results on Apr 21. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for ASB’s first-quarter earnings has moved 2.9% north over the past week.
MTB is scheduled to release first-quarter results on Apr 20. MTB currently has a Zacks Rank #3 and an Earnings ESP of +2.08%.
The Zacks Consensus Estimate for MTB’s first-quarter earnings has moved marginally downward over the past 30 days.
STT is scheduled to release earnings on Apr 14. The company, which carries a Zacks Rank #3 at present, has an Earnings ESP of +0.97%.
The Zacks Consensus Estimate for STT’s first-quarter earnings has been revised 2.1% north over the past month.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.