“Weak” Earnings Predicted for Citigroup

A major research firm dubbed Citigroup’s earnings as “weak” and cites mounting credit card concerns and lethargic profit margins which will plague the financial company over the next two years.

An Analyst noted that although Citigroup’s revenues were 2 percent ahead of consensus, which were mainly driven by capital markets revenues, the pressing issue is the deteriorating North American cards and despite the recent role of a Fed fund rate increase, net margins fell flat again.

"Despite the recent 25-basis point increase in the Fed funds rate, Citi's net interest margin was static at 2.72 percent,” stated by an analyst. "The weak net interest margin trajectory is disappointing and completely at odds with management's guidance that there should be some positive sensitivity to rising short rates."

The estimated figures seem to decline as the estimated fiscal earnings were cut by 0.2 percent, but the 2019 estimate was slashed to $6.80, a significant 11.1 percent. The 12-month price target was also reduced to $65 from $70, which is 10 percent below Friday’s closing price.

Societe Generale, a French multinational banking and financial services company, pulled back its rating on Citigroup shares to sell from hold Monday.

Despite the financial giant earnings beating expectations on Thursday, Citi shares have fallen more than 3 percent since the disclosure of the report. According to the analyst, group loan loss provisions were $2 billion, worse by 7 percent than consensus and increased 15 percent higher year over year. 

Although the concerning issue of the deteriorating trend over several quarters in North America are addressed and the forecasts have been adjusted accordingly.

Higher loan loss provisions not only dig into earnings, but may also expose mediocre debtors or poor credit.

Citigroup's Geographical Operations Boost Q3 Earnings

Companies have recently reported results for the third quarter of 2017, with Citigroup’s numbers looking comfortably ahead of investor expectations. The earnings exceeding was primarily because of the great progress in Citi’s global retail banking operations. The results also showed strong gain from the fact that Citigroup’s trading revenues projected better results than what the bank initially estimated in September.

Citigroup’s retail operations seemed to improve in revenues across reported branches. This was supported by strong loan growth globally, and also by a comeback in card balances.

The financial giant remains one of the best capitalized banking giants worldwide and has done extremely well regarding cost management despite its geographically scattered operations.

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