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Citigroup (C) Q1 Earnings Beat Estimates on Revenue Strength
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Citigroup (C - Free Report) has delivered a positive earnings surprise of 19.1% in first-quarter 2020, backed by revenue strength. Its adjusted earnings per share of $1.06 for the quarter handily outpaced the Zacks Consensus Estimate of 89 cents. However, it was below the year-ago quarter’s figure of $1.87 per share.
The stock declined more than 4% in pre-market trading, reflecting investors’ disappointment with the results. Notably, the full-day trading session will display a clearer picture.
Net income was $2.5 billion compared with $4.7 billion recorded in the prior-year quarter.
Citigroup recorded higher revenues, riding on strong performance in the Institutional Clients Group segment. Increase in client activity due to rise in volatility led to higher revenues from equity markets (up 39%). Also, strength in rates and commodities rose fixed-income revenues (up 39%) during the reported quarter.
Though corporate lending revenues disappointed on a more challenging environment, investment banking revenues remained largely stable as growth in advisory and equity underwriting were offset by a decline in debt underwriting.
Moreover, due to the adoption of the new current expected credit loss standard (CECL), the company’s cost of credit increased significantly. Nevertheless, Citigroup was successful in controlling expenses, which supported the bottom line. Also, loans and deposit balance improved.
Revenues Increase, Costs Remain Stable
Revenues were up 12% year over year to $20.7 billion in the first quarter. The reported figure also beat the Zacks Consensus Estimate of $19.1 billion. Higher revenues, both from Global Consumer Banking (GCB) and Institutional Clients Group (ICG), mainly led to the upside.
GCB revenues increased 1% year over year to $8.17 billion. Higher revenues mainly in North America resulted in the upsurge. Notably, both retail services and card revenues escalated.
In the Institutional Clients Group (ICG) segment, revenues were $12.5 billion in the quarter, up 25% year over year. Higher equity and fixed income market revenues were partly offset by lower corporate lending revenues.
Corporate/Other revenues were $73 million, down 84% from the prior-year quarter. The downside reflects the wind-down of legacy assets, impact of lower rates and marks on legacy securities.
Operating expenses at Citigroup remained stable year over year at $10.6 billion. The company continues to make investments in franchise, and compensation and volume-related expenses rose, which were offset by productivity savings and the wind-down of legacy assets.
Balance Sheet Improvement
At the end of the first quarter, Citigroup’s end of period assets were $2.22 trillion, up 13.8% sequentially. The company’s loans moved up 3.1% sequentially to $721 billion. Deposits were up 11% sequentially to $1.19 trillion.
Credit Quality: A Mixed Bag
Citigroup’s costs of credit for the March-end quarter were up substantially year over year to $7.03 billion. The upswing largely underlines the elevated net credit losses of $2.1 billion and a credit reserve build of $4.9 billion (compared with $20 million in the year-ago quarter), and provision for benefits and claims of $26 million.
Total non-accrual assets increased 12% year over year to $4.2 billion. The company reported a drop of 13% in consumer non-accrual loans to $1.7 billion. Yet, corporate non-accrual loans of $2.5 billion rose 43% from the year-earlier period.
Citigroup’s total allowance for loan losses was $20.8 billion at the end of the reported quarter or 2.91% of total loans compared with $12.3 billion or 1.82% recorded in the year-ago period.
Solid Capital Position
At the end of the January-March period, Citigroup’s Common Equity Tier 1 Capital ratio was 11.2%, down from the prior-year quarter’s 11.9%. The company’s supplementary leverage ratio for the quarter was 6%, down from the year-earlier quarter’s 6.4%.
As of Mar 31, 2020, book value per share was $83.75, up 9% year over year, and tangible book value per share was $71.52, up 9% from the comparable period last year.
Capital Deployment
Notably, during the first quarter, the company bought back about 41 million of common stock and returned around $4 billion to common shareholders as common stock repurchases and dividends.
Our Viewpoint
Citigroup reported decent results even this time around. Strong underwriting business and fixed income revenues are driving factors. The company exhibits capital strength, which continues to support its dividend and share-buyback program.
One can consider a strong brand like Citigroup to be a sound investment option for the long term, given its global footprint and attractive core business. Additionally, the company’s growth looks encouraging on top-line strength as well as ease of regulations.
Nevertheless, several legal hassles are concerning for the company. Furthermore, higher credit costs are other concerns. In addition, economic slowdown and concerns over the covid-19 outbreak are near-term headwinds.
Driven by top-line strength, First Republic Bank delivered a positive earnings surprise of 30.4% in first-quarter 2020. Its earnings per share of $1.20 surpassed the Zacks Consensus Estimate of 92 cents. However, the bottom line was down 4.8% from the year-ago quarter.
Wells Fargo (WFC - Free Report) reported first-quarter 2020 earnings of 1 cent per share, including a reserve build of $3.1 billion and certain other items amid coronavirus scare. The Zacks Consensus Estimate for the same was pegged at 22 cents.
JPMorgan’s (JPM - Free Report) first-quarter 2020 earnings were 78 cents per share, which missed the Zacks Consensus Estimate of $1.70, thanks to a substantial rise in provisions, owing to coronavirus-related concerns.
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Citigroup (C) Q1 Earnings Beat Estimates on Revenue Strength
Citigroup (C - Free Report) has delivered a positive earnings surprise of 19.1% in first-quarter 2020, backed by revenue strength. Its adjusted earnings per share of $1.06 for the quarter handily outpaced the Zacks Consensus Estimate of 89 cents. However, it was below the year-ago quarter’s figure of $1.87 per share.
The stock declined more than 4% in pre-market trading, reflecting investors’ disappointment with the results. Notably, the full-day trading session will display a clearer picture.
Net income was $2.5 billion compared with $4.7 billion recorded in the prior-year quarter.
Citigroup recorded higher revenues, riding on strong performance in the Institutional Clients Group segment. Increase in client activity due to rise in volatility led to higher revenues from equity markets (up 39%). Also, strength in rates and commodities rose fixed-income revenues (up 39%) during the reported quarter.
Though corporate lending revenues disappointed on a more challenging environment, investment banking revenues remained largely stable as growth in advisory and equity underwriting were offset by a decline in debt underwriting.
Moreover, due to the adoption of the new current expected credit loss standard (CECL), the company’s cost of credit increased significantly. Nevertheless, Citigroup was successful in controlling expenses, which supported the bottom line. Also, loans and deposit balance improved.
Revenues Increase, Costs Remain Stable
Revenues were up 12% year over year to $20.7 billion in the first quarter. The reported figure also beat the Zacks Consensus Estimate of $19.1 billion. Higher revenues, both from Global Consumer Banking (GCB) and Institutional Clients Group (ICG), mainly led to the upside.
GCB revenues increased 1% year over year to $8.17 billion. Higher revenues mainly in North America resulted in the upsurge. Notably, both retail services and card revenues escalated.
In the Institutional Clients Group (ICG) segment, revenues were $12.5 billion in the quarter, up 25% year over year. Higher equity and fixed income market revenues were partly offset by lower corporate lending revenues.
Corporate/Other revenues were $73 million, down 84% from the prior-year quarter. The downside reflects the wind-down of legacy assets, impact of lower rates and marks on legacy securities.
Operating expenses at Citigroup remained stable year over year at $10.6 billion. The company continues to make investments in franchise, and compensation and volume-related expenses rose, which were offset by productivity savings and the wind-down of legacy assets.
Balance Sheet Improvement
At the end of the first quarter, Citigroup’s end of period assets were $2.22 trillion, up 13.8% sequentially. The company’s loans moved up 3.1% sequentially to $721 billion. Deposits were up 11% sequentially to $1.19 trillion.
Credit Quality: A Mixed Bag
Citigroup’s costs of credit for the March-end quarter were up substantially year over year to $7.03 billion. The upswing largely underlines the elevated net credit losses of $2.1 billion and a credit reserve build of $4.9 billion (compared with $20 million in the year-ago quarter), and provision for benefits and claims of $26 million.
Total non-accrual assets increased 12% year over year to $4.2 billion. The company reported a drop of 13% in consumer non-accrual loans to $1.7 billion. Yet, corporate non-accrual loans of $2.5 billion rose 43% from the year-earlier period.
Citigroup’s total allowance for loan losses was $20.8 billion at the end of the reported quarter or 2.91% of total loans compared with $12.3 billion or 1.82% recorded in the year-ago period.
Solid Capital Position
At the end of the January-March period, Citigroup’s Common Equity Tier 1 Capital ratio was 11.2%, down from the prior-year quarter’s 11.9%. The company’s supplementary leverage ratio for the quarter was 6%, down from the year-earlier quarter’s 6.4%.
As of Mar 31, 2020, book value per share was $83.75, up 9% year over year, and tangible book value per share was $71.52, up 9% from the comparable period last year.
Capital Deployment
Notably, during the first quarter, the company bought back about 41 million of common stock and returned around $4 billion to common shareholders as common stock repurchases and dividends.
Our Viewpoint
Citigroup reported decent results even this time around. Strong underwriting business and fixed income revenues are driving factors. The company exhibits capital strength, which continues to support its dividend and share-buyback program.
One can consider a strong brand like Citigroup to be a sound investment option for the long term, given its global footprint and attractive core business. Additionally, the company’s growth looks encouraging on top-line strength as well as ease of regulations.
Nevertheless, several legal hassles are concerning for the company. Furthermore, higher credit costs are other concerns. In addition, economic slowdown and concerns over the covid-19 outbreak are near-term headwinds.
Citigroup Inc. Price, Consensus and EPS Surprise
Citigroup Inc. price-consensus-eps-surprise-chart | Citigroup Inc. Quote
At present, Citigroup carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Major Banks
Driven by top-line strength, First Republic Bank delivered a positive earnings surprise of 30.4% in first-quarter 2020. Its earnings per share of $1.20 surpassed the Zacks Consensus Estimate of 92 cents. However, the bottom line was down 4.8% from the year-ago quarter.
Wells Fargo (WFC - Free Report) reported first-quarter 2020 earnings of 1 cent per share, including a reserve build of $3.1 billion and certain other items amid coronavirus scare. The Zacks Consensus Estimate for the same was pegged at 22 cents.
JPMorgan’s (JPM - Free Report) first-quarter 2020 earnings were 78 cents per share, which missed the Zacks Consensus Estimate of $1.70, thanks to a substantial rise in provisions, owing to coronavirus-related concerns.
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This outperformance has not just been a recent phenomenon. From 2000 – 2019, while the S&P averaged +6.0% per year, our top strategies averaged up to +54.7% per year.
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