Please ensure Javascript is enabled for purposes of website accessibility

Citigroup Earnings: An Early Look

By Dan Caplinger - Apr 11, 2013 at 10:31AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Will the big bank impress investors with its recent run of good news?

Earnings season has begun, and next Monday, Citigroup (C -0.06%) will release its latest quarterly results. The key to making smart investment decisions on stocks reporting earnings is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. 

Citigroup has come a long way from the depths of the financial crisis, having managed to survive with the help of government assistance. Yet despite a big move in its stock over the past year, Citigroup still languishes below its levels from 2010 and 2011, let alone its loftier pre-crisis prices. 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 quarterly report.

Stats on Citigroup

Analyst EPS Estimate

$1.18

Change From Year-Ago EPS

6.3%

Revenue Estimate

$20.1 billion

Change From Year-Ago Revenue

3.6%

Earnings Beats in Past 4 Quarters

3

Source: Yahoo! Finance.

Can Citigroup get back on the right foot this quarter?
Analysts haven't been too excited recently about Citigroup's earnings prospects, as they cut their earnings-per-share consensus for the just-ended quarter by $0.07. They don't see the bank making up the difference during the rest of 2013, having cut their full-year views by $0.06 per share. Yet all of that negativity hasn't hit the stock at all, which has jumped more than 7% since early January.

Citigroup has had a lot of good news lately. Most notably, Citi passed the Fed's latest round of stress tests with an extremely strong capital position, readying it to survive the Fed's stress scenario without further need to raise additional funds. With its minimum capital ratio of 8.3% under the stress tests, Citigroup bested JPMorgan Chase (JPM -0.82%) by two full percentage points and topped rivals Bank of America (BAC -1.71%) and Wells Fargo (WFC -0.79%) by more than a percentage point as well.

Moreover, Citi also benefited from the dismissal of antitrust and other claims related to last year's LIBOR scandal. Citi, B of A, and JPMorgan were among those requesting the dismissal last year, and a court found that LIBOR wasn't intended to be a competitive market and, therefore, that anti-competition laws didn't apply.

Yet Citigroup disappointed investors somewhat by choosing not to ask the Fed for permission to raise its dividend from its token $0.01 quarterly payout. Given its improved condition, Citi most likely could have gotten permission for a larger dividend. Yet with new CEO Michael Corbat seeking to cement his reputation as a traditional banker, the decision is consistent with projecting an image of safety and security.

One reason for the conservative stance may be that Citigroup still faces some potential problems. A couple weeks ago, the company had a federal judge question Citigroup's proposed settlement of claims related to investor allegations that the bank should have written down subprime mortgage-backed assets earlier than it did. A reversal of the settlement could lead to Citi's having to make a larger payout down the road. Moreover, further lingering liability from still-outstanding LIBOR claims and other lawsuits could cost the bank more in the future.

In Citi's quarterly report, watch for CEO Corbat to plot its longer-term course toward returning more capital to shareholders. At some point, even a conservative leader should conclude that the bank is healthy enough to give investors their due. 

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

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Citigroup Inc. Stock Quote
Citigroup Inc.
C
$49.75 (-0.06%) $0.03
Bank of America Corporation Stock Quote
Bank of America Corporation
BAC
$33.86 (-1.71%) $0.59
JPMorgan Chase & Co. Stock Quote
JPMorgan Chase & Co.
JPM
$117.34 (-0.82%) $0.97
Wells Fargo & Company Stock Quote
Wells Fargo & Company
WFC
$41.67 (-0.79%) $0.33

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
330%
 
S&P 500 Returns
115%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/22/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.