Earnings Preview : Citigroup Inc. (NYSE: C) Second Quarter 2010
Wednesday, July 14, 2021 12:22 PM

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Citigroup, Inc. (NYSE: C) the third-biggest U.S. bank by assets, is scheduled to release second quarter 2010 financial results before the opening bell on Friday, July 16, 2010. Analysts, on average, expect the company to report earnings of 5 cents per share on revenue of $22.16 billion. In the year-ago quarter, Citigroup reported earnings of 49 cents per share on revenue of $29.97 billion.

Citigroup, Inc., a global financial services company, provides consumers, corporations, governments, and institutions with a range of financial products and services, including consumer banking and credit, corporate and investment banking, securities brokerage, and wealth management.

In the preceding first quarter, the firm posted a surprise profit that beat analysts' estimates, helped by a decline in losses from bad loans. Net income surged to $4.4 billion, compared to a profit of $1.59 billion in the year-earlier quarter. The New York-based bank posted net income to shareholders of 15 cents a share, compared to a loss of 18 cents a share in the prior-year quarter. Revenue fell to $25.42 billion from $26.97 billion in the year-ago period. Analysts, on average, expected the company to report breakeven per share on revenue of $20.77 billion. At the end of the first quarter, Tier 1 Capital and Tier 1 Common ratios were 11.2% and 9.1% respectively.

Last month, the bank reported that its 30-day credit-card delinquency rate dropped to 5.59 percent in May, from 5.85 in April. Its net charge-offs declined to 11.16 percent from 11.23 percent.

Analysts expect Citigroup to report weaker investment banking and trading revenues compared to the first quarter, reflecting the impact of volatile capital markets. However, the bank is expected to benefit from improving credit trends.

Late in June, House and Senate lawmakers reached landmark agreement on overhauling financial regulation, easing investors' concern over the bill. The approval of the historic financial regulation eliminated some of the uncertainty surrounding the financial industry.  Although the lawmakers softened Obama administration's proposal to ban banks from proprietary trading, the exact impact of the legislation remains difficult to quantify. In addition, Card Act is expected to have an increasingly negative impact on its US credit card revenues. According to analysts at Goldman Sachs, new financial regulations could cut Citigroup's future earnings per share by as much as 27 percent.

Citigroup, one of the hardest hit banks by the credit crisis, is shedding its complex businesses and spinning off unwanted assets to reduce its size by about one-third and focus on its core businesses. Last year, the company realigned its businesses into two primary operating units - Citicorp and Citi Holdings. While Citicorp combines the retail, corporate, and investment-banking business, Citi Holdings consists of the firm's non-core riskier investment assets including the mortgage-backed securities that undermined the bank during credit crisis.

Recently, Citigroup agreed to sell a portfolio of private-equity investments to Lexington Partners Inc. and StepStone Group LLC for an undisclosed sum. Late in June, the bank announced the sale of an auto-loan portfolio worth $3.2 billion to a unit of Banco Santander as part of its restructuring plan. It also announced that CitiFinancial would close 330 US branches and cut 500 to 600 jobs to make the division more profitable. In April, Citigroup sold its Canadian MasterCard business to the Canadian Imperial Bank of Commerce and its hedge-fund business to alternative- investment firm SkyBridge Capital LLC.

Early in July, the Treasury Department announced that it sold 2.6 billion shares of Citigroup from April 26 through July 1.  So far, the Treasury has sold 2.6 billion shares at an average price of $4.03 per share, for gross proceeds of around $10.5 billion. It currently owns approximately 5.1 billion shares of Citigroup common stock, which translates to about 18% stake. The Treasury expects to continue selling the stake in the market in an orderly fashion once the blackout period set by Citigroup related to its second quarter earnings release ends. Last year, the government received 7.7 billion shares of Citigroup common stock as part of the exchange offers conducted by Citigroup to strengthen its capital base. Late in March, the Treasury confirmed that it will sell all of the Citigroup shares it owns over the course of this year. The Treasury Department's departure would finally free Citi from the shackles of government control, which in turn would help the management to focus on returning the bank to profitability.

In terms of stock performance, Citigroup shares have gained nearly 30 percent since the beginning of the year.

Disclosure: Author doesn't own any of the stocks discussed here.

 

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