Citigroup (C) first quarter results: what to expect

Ddepending on who you ask, banking stocks are poised to be this year’s best performer relative to other sectors. Factors such as less accommodative monetary policy and the recent rise in US Treasury yields bode well for commercial bank stocks, including Citigroup (C).

Although Citigroup has done a solid job in recent quarters managing the low rate environment, it still has a lot of ground to catch up against its peers. But is this the right time to bet on outperformance? We’ll know when the bank releases the results for the first quarter of fiscal 2022 before the opening bell on Thursday. Citigroup has come under pressure from regulators to fix issues with internal controls over compliance, data and risk management, including a $400 million fine and a cease-and-desist order.

But as the fourth-largest bank in the United States, there is always attractive business here. The bank has traded well below its 52-week high of $80, and in the past five quarters, Citi has exceeded consensus EPS estimates five times. What’s more, the fact that the Federal Reserve has started to raise interest rates and will probably do so four more times this year. And in terms of value, Citi is currently trading at around 80% of its tangible book value. That, combined with an attractive dividend yield of 3.1%, as well as a possible increase in share buybacks, makes Citi a stock to own in 2022.

For the three months ending in March, analysts expect the New York-based bank to earn $1.65 a share on revenue of $18.29 billion. That compares to the year-ago quarter where earnings were $3.62 per share on revenue of $19.33 billion. For the full year, ending in December, earnings are expected to be $6.70 per share, compared to $10.14 per share a year ago, while annual revenue of $72.06 billion dollars would increase by 0.2% year over year.

While global growth remains a concern, which could impact Citigroup given the bank’s global reach, management has reduced the bank’s high-risk and illiquid assets. The company is strategically reorienting its activities and abandoning consumer banking operations in certain regions. Management realigns Citi’s structure to focus on areas such as Personal Banking, Wealth Management and Legacy Franchises segments

These measures not only boosted the bank’s revenue and return on equity, but also simplified the business model. And as the economy begins to fully reopen, Citigroup’s net interest income will increase as it benefits from continued loan and deposit growth. In the fourth quarter, Citigroup beat both revenue and earnings and announced plans to divest its four consumer business units in Southeast Asia to United Overseas Bank.

Fourth-quarter adjusted EPS of $1.99 was up 4% year-over-year, while revenue of $17.02 billion beat estimates by $240 million. As was the case in the previous quarter, fourth quarter results were driven by strong performances in investment banking, its private banking and securities services. Institutional Clients revenue of $9.87 billion fell 4% year-over-year. “We had a decent end to 2021, bringing net income for the year to $22 billion in a much better credit environment than the prior year,” CEO Jane Fraser said.

These improved metrics, combined with the bank’s efforts to increase operational efficiency through strategic cost reductions, are paying off. On Thursday, the market will want to see if these trends can continue.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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