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Consumer Banking Strength to Aid Citigroup's (C) Q1 Earnings
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Citigroup (C - Free Report) is scheduled to report first-quarter 2020 results, before the opening bell on Apr 15.
The outbreak of novel coronavirus created volatility in the markets during first-quarter 2020, resulting in higher client activities. Thus, Citigroup’s fixed income revenues, which constitute nearly 30% of total revenues, are expected to have registered growth.
At a conference held last month, the company’s CFO Mark Mason stated, “I think the more volatile market conditions and the large intra-day swings we've seen have resulted in higher trading revenues year over year across the franchise.”
Other Factors at Play
Soft Growth in Consumer Banking Revenues: While the company might have maintained its revenue growth momentum in the first two months of the quarter, a slowdown in economic activity due to the pandemic, particularly in March, is likely to have strained consumer banking revenues.
Card fees might have been hurt slightly in March on lower consumer spending due to the shutdowns. Also, the company has waived certain fees, including that on monthly services, and penalties on early withdrawal, which is expected to have impacted revenues.
Investment Banking (IB) Fees Decline: Due to the coronavirus outbreak, IB activities are likely to have reduced during the quarter. While the bank might have recorded fees from a lag in deal closings, the IPO market has witnessed a slowdown, thereby adversely impacting Citigroup’s advisory fees.
Also, equity market performance was weak and overall debt issuances were muted due to soft loan demand. Thus, growth in equity underwriting and debt origination fees is expected to have been muted in the quarter under review.
The consensus estimate for IB fees of $1.30 billion indicates a 3.6% fall from the prior-year reported number.
Net Interest Income (NII) Growth Muted: Federal Reserve’s move to lower interest rates to near-zero level in March to support the U.S. economy from coronavirus-induced slowdown might have dampened banks’ net interest margin to an extent.
However, per the Fed’s latest data, the lending scenario was decent during the quarter on a year-over-year basis, with support from higher commercial and industrial (C&I), and consumer loans. Also, a decline in deposit costs might have supported margins.
The Zacks Consensus Estimate for NII of $11.9 billion suggests 1% growth on a year-over-year basis.
Credit Costs Stable: Costs of credit are likely to have remained unaltered quarter over quarter. Citigroup expects NCL rate of 300-325 basis points (bps) for 2020 for U.S. branded cards. In retail services, NCL rate is projected at 500-525 bps for the year.
Here is what our quantitative model predicts:
Citigroup 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 -4.79%.
Zacks Rank: Citigroup currently carries a Zacks Rank of 5 (Strong Sell).
The Zacks Consensus Estimate for its earnings of $1.90 suggests a 1.6% rise on a year-over-year basis. Further, the consensus estimate for sales of $18.87 billion indicates 1.6% growth from the prior-year quarter.
Here are some stocks you may want to consider, as according to our model these have the right combination of elements to post an earnings beat this quarter.
The Earnings ESP for Carolina Financial Corporation is +1.43% and it carries a Zacks Rank of 3 currently. The company is expected to report quarterly numbers in the coming days.
SB ONE BANCORP is likely to report quarterly earnings soon. The company, which carries a Zacks Rank of 3 at present, has an Earnings ESP of +1.56%.
Just Released: Zacks’ 7 Best Stocks for Today
Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.5% per year.
These 7 were selected because of their superior potential for immediate breakout.
Image: Shutterstock
Consumer Banking Strength to Aid Citigroup's (C) Q1 Earnings
Citigroup (C - Free Report) is scheduled to report first-quarter 2020 results, before the opening bell on Apr 15.
The outbreak of novel coronavirus created volatility in the markets during first-quarter 2020, resulting in higher client activities. Thus, Citigroup’s fixed income revenues, which constitute nearly 30% of total revenues, are expected to have registered growth.
At a conference held last month, the company’s CFO Mark Mason stated, “I think the more volatile market conditions and the large intra-day swings we've seen have resulted in higher trading revenues year over year across the franchise.”
Other Factors at Play
Soft Growth in Consumer Banking Revenues: While the company might have maintained its revenue growth momentum in the first two months of the quarter, a slowdown in economic activity due to the pandemic, particularly in March, is likely to have strained consumer banking revenues.
Card fees might have been hurt slightly in March on lower consumer spending due to the shutdowns. Also, the company has waived certain fees, including that on monthly services, and penalties on early withdrawal, which is expected to have impacted revenues.
Investment Banking (IB) Fees Decline: Due to the coronavirus outbreak, IB activities are likely to have reduced during the quarter. While the bank might have recorded fees from a lag in deal closings, the IPO market has witnessed a slowdown, thereby adversely impacting Citigroup’s advisory fees.
Also, equity market performance was weak and overall debt issuances were muted due to soft loan demand. Thus, growth in equity underwriting and debt origination fees is expected to have been muted in the quarter under review.
The consensus estimate for IB fees of $1.30 billion indicates a 3.6% fall from the prior-year reported number.
Net Interest Income (NII) Growth Muted: Federal Reserve’s move to lower interest rates to near-zero level in March to support the U.S. economy from coronavirus-induced slowdown might have dampened banks’ net interest margin to an extent.
However, per the Fed’s latest data, the lending scenario was decent during the quarter on a year-over-year basis, with support from higher commercial and industrial (C&I), and consumer loans. Also, a decline in deposit costs might have supported margins.
The Zacks Consensus Estimate for NII of $11.9 billion suggests 1% growth on a year-over-year basis.
Credit Costs Stable: Costs of credit are likely to have remained unaltered quarter over quarter. Citigroup expects NCL rate of 300-325 basis points (bps) for 2020 for U.S. branded cards. In retail services, NCL rate is projected at 500-525 bps for the year.
Here is what our quantitative model predicts:
Citigroup 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 -4.79%.
Zacks Rank: Citigroup currently carries a Zacks Rank of 5 (Strong Sell).
The Zacks Consensus Estimate for its earnings of $1.90 suggests a 1.6% rise on a year-over-year basis. Further, the consensus estimate for sales of $18.87 billion indicates 1.6% growth from the prior-year quarter.
Citigroup Inc. Price and EPS Surprise
Citigroup Inc. price-eps-surprise | Citigroup Inc. Quote
Stocks That Warrant a Look
Here are some stocks you may want to consider, as according to our model these have the right combination of elements to post an earnings beat this quarter.
BCB Bancorp, Inc. (NJ) (BCBP - Free Report) is expected to release quarterly results soon. The company currently has an Earnings ESP of +4.17% and a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Earnings ESP for Carolina Financial Corporation is +1.43% and it carries a Zacks Rank of 3 currently. The company is expected to report quarterly numbers in the coming days.
SB ONE BANCORP is likely to report quarterly earnings soon. The company, which carries a Zacks Rank of 3 at present, has an Earnings ESP of +1.56%.
Just Released: Zacks’ 7 Best Stocks for Today
Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.5% per year.
These 7 were selected because of their superior potential for immediate breakout.
See these time-sensitive tickers now >>