Citigroup, Inc. Earnings: Can the Bank Stop Its Tailspin?

Investors expect further drops in revenue and earnings for the banking giant.

Jul 11, 2014 at 1:17PM

C Large Unattributed

On Monday, Citigroup (NYSE:C) will release its quarterly report, and investors have a lot of uncertainty about the bank's ability to keep growing in light of recent setbacks. With even the arguably healthier Wells Fargo (NYSE:WFC) having seen revenue drop due to lower total loan volume, Citigroup faces an uphill battle to buck the trend and find ways to boost its business even as competitive pressures from Bank of America (NYSE:BAC) and other big-bank rivals fight hard to win market share in the industry.

Many investors put Citigroup in the same category as Wells Fargo, Bank of America, and other big U.S. banks, given its stature in the U.S. deposit market. Yet Citigroup has unique qualities, one of the most important of which is its commitment to its global scope. As a result, Citigroup has opportunities in overseas markets that its U.S. rivals choose not to pursue, but it also carries additional risks that its peers avoid. Is global domination the key to Citigroup's future growth? Let's take an early look at what's been happening with Citigroup over the past quarter and what we're likely to see in its report.

Stats on Citigroup

Analyst EPS Estimate

$1.06

Change From Year-Ago EPS

(21%)

Revenue Estimate

$18.91 billion

Change From Year-Ago Revenue

(7.7%)

Earnings Beats in Past 4 Quarters

2

Source: Yahoo! Finance.

When will Citigroup earnings start to grow again?
In recent months, investors have gotten much more pessimistic in their views on Citigroup earnings, cutting second-quarter estimates by $0.16 per share and reining in full-year 2014 and 2015 projections by 3% to 4%. The stock has gone nowhere, climbing less than 1% since early April.

C Small Unattributed

Citigroup's first-quarter earnings report gave shareholders some welcome good news, especially given that the Federal Reserve had just rejected Citigroup's proposal to raise its dividend and start returning more capital to shareholders. Adjusted net income rose from year-ago levels, and the bank continued to wind down its holdings of bad assets under its Citi Holdings unit, working to rid itself of the lingering impact of the financial crisis. Yet like Wells Fargo and Bank of America, Citigroup struggled from poor results in its mortgage-lending division, and Citi also had to deal with reduced revenue from its trading unit due to the unpredictable interest rate environment.

Yet Citigroup still has a long way to go to catch up to its peers in many ways. For instance, from 2011 to 2013, Bank of America and Wells Fargo reduced their provisions for loan losses by more than 70%, but Citigroup's credit-quality improvement has been a lot slower, with provisions declining by less than a third over the same time period. Much of the trouble is coming from Citigroup's foreign exposure, with Latin American consumer credit loss provisions actually having jumped by almost a third during the past few years. Similarly, overseas risks for Citigroup have ballooned in other areas, with a downward revision earlier this year resulting from client fraud in its Mexican lending operations and with concerns that similar problems involving collateral fraud might have occurred in China recently.

Litigation risk has also continued to plague Citigroup. Just earlier this week, reports suggested that Citigroup could pay as much as $7 billion to settle allegations that it engaged in abusive behavior in nits mortgage-lending practices prior to the financial crisis. Citigroup isn't the only bank that's been on the hook for similar liability, with Bank of America facing similar charges and some other banks already having settled mortgage-abuse allegations. Nevertheless, a settlement of that magnitude would represent several months' worth of net income and remind investors that one-time charges for past behavior might not be over and done with just yet.

Still, the big question for Citigroup investors is whether the stock already reflects these challenges. Citigroup at an even bigger discount to book value than Bank of America, and its valuation is a lot more attractive than Wells Fargo.

In the Citigroup earnings report, watch to see how the company's numbers compare with Wells Fargo's release on Friday. If it can keep its loan losses moving downward and stabilize its poorer-performing business units, then Citigroup could give investors a nice surprise on Monday.

Citigroup + Apple? This device makes it possible.
Apple recently recruited a secret-development Dream Team to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out... and some early viewers are even claiming its everyday impact could trump the iPod, iPhone, AND the iPad. In fact, ABI Research predicts 485 million of these type of devices will be sold per year. But one small company makes this gadget possible. And its stock price has nearly unlimited room to run for early in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!

Click here to add Citigroup to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.

Dan Caplinger owns shares of Apple and warrants on Bank of America and Wells Fargo. The Motley Fool recommends and owns shares of Apple, Bank of America, and Wells Fargo. It owns shares of Citigroup. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.


Compare Brokers