Citigroup (NYSE:C) will release its quarterly report on Monday, and investors have been increasingly worried about the bank's prospects. Even as Wells Fargo (NYSE:WFC) reported solid results Friday morning, Citigroup has faced more extensive regulatory challenges, as well as difficulty in keeping its operational performance as high as it had hoped. As a result, shareholders wonder whether Citigroup will be able to keep up with Bank of America (NYSE:BAC), Wells Fargo, and other banking peers, especially given that Citigroup's share-price performance hasn't matched up well against its rivals so far in 2014.

Citigroup has posted an impressive recovery since its lows during the financial crisis, making considerable headway in shoring up its capital position and providing good gains for its stock for those shareholders who had the courage to hang on to their shares or add to positions after the 2009 bottom. But Citigroup has had to deal with challenges from including settlement liability to toxic assets, regulatory setbacks, and threats to its 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


Change From Year-Ago EPS


Revenue Estimate

$19.37 billion

Change From Year-Ago Revenue


Earnings Beats in Past 4 Quarters


Source: Yahoo! Finance.

What will happen to Citigroup earnings Monday?
Analysts have cut their views on Citigroup earnings substantially over the past several months, reducing their first-quarter estimates by about 20% and knocking more than 10% from their full-year 2014 projections. The stock has also struggled, losing about 15% since early January.

Citigroup's fourth-quarter results didn't start things off on the right foot for the bank, as even solid growth wasn't enough to impress shareholders. Revenue fell almost 3%, and even though Citigroup's adjusted net income rose 15%, it saw substantially lower volumes of mortgage refinancing, which helped to hold back its consumer banking segment. Lower mortgage volumes have been a problem throughout the industry, but more broadly, consumer banking at Wells Fargo and Bank of America has held up much better than at Citigroup. Yet despite failing to make shareholders happy, Citigroup CEO Michael Corbat said the bank's long-term turnaround is still intact and on course for success.

More recently, though, Citigroup's problems seem to have compounded. Last month, the Federal Reserve singled out Citigroup among the nation's largest banks in denying its proposed capital plan. Citigroup had wanted to quintuple its quarterly dividend to $0.05 per share and initiate a stock buyback of $6.4 billion, but the Fed characterized Citigroup's revenue-loss projections under high-stress scenarios as deficient. Then, just earlier this week, reports surfaced that Citigroup could miss its profit expectations for the first quarter, as returns on tangible common equity might fall below its own projections.

Operationally, Citigroup will also have some new challenges to face in the future. The bank has about $19 billion in home equity lines of credit from the housing-bubble era that will reach the end of their draw period and start requiring principal and interest payments. If borrowers are not able to repay, it could lead to a replay of the delinquencies we saw during the run-up to the financial crisis. With resets scheduled to soar in 2015 and 2016, Citigroup needs to anticipate any potential problems from these troubling loans.

The big question Citigroup has to answer is whether its long-range plans will succeed in getting the bank back to basics. As new regulatory requirements like higher capital minimums take effect, Citigroup has to take advantage of its attractive net interest margin and efficiency ratio to boost its internal returns and get more income to fall to the bottom line. In particular, with valuable deferred tax assets relying on Citigroup continuing to increase its pre-tax income, Citigroup has to make sure it makes the most of its opportunity.

In the Citigroup earnings report, watch to see how the bank's results compare to those of Wells Fargo. Even if Citigroup's can't match its rivals entirely, it's important for the bank to show investors its path toward a brighter future.

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