Citigroup outperforms with first-quarter profit and revenue overtake

Citigroup (NYSE:C) reported better-than-expected results for the first quarter of 2022, with both higher earnings and revenue. Following the news, shares of the global investment bank rose 1.56% to close at $50.93 on Thursday.

Results in detail

Citigroup reported earnings of $2.02 per share in the quarter, easily beating Street estimates of $1.55 per share, but down 44% year-over-year. Net income of $4.3 billion fell 46% due to the high cost of credit, higher expenses and lower revenues. Results were impacted by approximately $677 million ($588 million after tax) related to consumer disengagement.

Revenue was $19.2 billion, down 2% year-over-year, but beat analysts’ expectations of $18.15 billion. Lower non-interest income across all businesses was recorded, partially offset by strong net interest income.

The net interest margin was 2.05%, up three basis points.

On a sector basis, the company’s Personal Banking and Wealth Management segment reported revenue of $5.9 billion, down 1% year-over-year, impacted by a reduction in other revenue than interest, partly offset by an increase in net interest income. Revenue of $1.93 billion was recorded in the legacy franchise segment, down 14%.

On the poor performance of Investment Banking, Corporate Banking and Markets revenue, revenue in the Institutional Clients Group segment fell 2% to $11.16 billion. Decreased client activity in capital markets due to geopolitical and macroeconomic ambiguity was partly mitigated by higher advisory fees.

On the contrary, services revenue of $3.45 billion jumped 15%. Net interest income on deposit balances and high spreads, along with strong fee growth, acted as tailwinds.

Additionally, net credit losses were down 50% year-over-year to $872 million in the quarter.

On the negative side, Citigroup’s spending rose 15% year over year to $13.17 billion. Excluding the impact of divestitures in Asia, costs jumped 10%. Continued investments in the bank’s transformation, business-led investments and volume-related spending have increased cost pressure. However, productivity gains partially offset the increase.

Other measures

Citigroup reported total loans of $660 billion, down 1% from the year-ago quarter. Meanwhile, total deposits grew 3% to $1.33 trillion.

The Common Equity Tier 1 ratio and the Supplemental Leverage Ratios (SLR) stand at 11.4% and 5.6% respectively.

Return on average common equity and return on average tangible common equity (RoTCE) for the quarter were 9% and 10.5%, respectively.

During the quarter, Citigroup repurchased approximately 50 million common shares, returning approximately $4 billion to common shareholders in the form of repurchases and dividends.

Official comments

Looking ahead, Citigroup CEO Jane Fraser said, “While we are making the necessary investments in our infrastructure, our risks and controls, and our business, we remain committed to improving our returns over the medium term.

For 2022, management still expects sub-single-digit revenue growth and mid-single-digit expense growth, both excluding the impact of the divestment.

The Taking of Wall Street

Following the Q1 earnings report, CFRA maintained a Buy rating on Citigroup but reduced the price target to $62 (21.74% upside potential) from $76.

The rest of the street is cautiously bullish on the stock, with a moderate buy consensus rating based on eight buys, seven holds and one sell. The average Citigroup stock price forecast of $70 implies upside potential of 37.44% from current levels. Stocks are down about 30% over the past year.

Bloggers weigh

Bloggers seem excited about the company’s results. Data from TipRanks shows that financial bloggers’ views are 89% bullish on Citigroup, compared to an industry average of 70%.

The essential

Citigroup’s strategic moves, operational restructuring and robust deposit balance, as well as high analyst ratings, are factors to consider when investing in this stock.

However, investors might be wary of relatively low rates and high inflation, as well as the bank’s capital markets, investment banking and banking revenue activities.

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Sallie R. Loera