Tuesday, July 12, 2011

Citigroup, Inc. (NYSE: C): Q2 Earnings Preview 2011

Citigroup, Inc. (NYSE: C) is scheduled to release second-quarter financial results before the market open on Friday, July 15, 2011. Analysts, on average, expect the company to report earnings of 97 cents per share on revenue of $19.94 billion. In the year-ago quarter, the company reported earnings of 90 cents per share on revenue of $25.42 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, credit cards, corporate and investment banking, securities brokerage, and wealth management. In 2010, Citigroup recorded its first full-year profit since the crisis began — and untangled most of its remaining ties with Washington.

The bank, which struggled amid mounting losses on credit cards and mortgages, has been selling some of its assets from its Citi Holdings unit. Meanwhile, Citigroup’s core business is progressing well and the international business is gaining momentum. Citi’s performance has been overall stable in the trailing five quarters. 

In the preceding first quarter, the New York-based company’s net income was $3 billion, or 10 cents per share, compared to $4.43 billion, or 15 cents a share, in the year-ago period. Revenue totaled $19.7 billion, down from the year-earlier $25.4 billion. Analysts, on average, expected the company to report earnings of 9 cents per share on revenue of $20.55 billion.

All big US banks have returned to profitability amid easing loan losses. Lending is slowly picking up. The job market is slowly but steadily improving, which should lead to better credit quality for consumer loans.Even dividend increases have resumed at some institutions.

Recent comments by the management suggest that Citi has turned the corner. In May, the bank reinstated a one-cent quarterly dividend and also engineered a reverse split to lift its stock out of the single digits. Increasing the share price tenfold, even if it is cosmetic, leads individual shareholders to take another look at Citigroup’s stock, and make it easier to buy for institutional investors that have restrictions on owning shares priced under $5. It would also restore Citigroup’s place among the companies that make up indexes like the Dow Jones industrial average, which banished it once the stock started to fall. Citi will begin to pay a dividend of a penny per share in the second quarter, its first dividend since 2009. Citigroup is not expected to be able to buy back stock until 2012 at the earliest, because its financial condition remains weaker.

However, trading revenue remains a wild card. Like many rivals, Citigroup is struggling to boost revenue. A volatile trading environment has depressed investment banking profit and an uncertain economy is shrinking consumer lending.

Citigroup has a global footprint with operations in over 160 countries and jurisdictions, helping corporate clients and consumers with their local and global needs. The company’s significant presence in the emerging markets enables it to offer clients access, exposure and insight into the highest growth areas of the world.

Citigroup’s core business, Citicorp, remains very attractive and its unique franchise allows clients to access high growth foreign markets. The segment has reported consistent revenues, despite the financial turmoil in the past two years. Going forward, the company looks forward to capitalizing on the enormous strength of this franchise, once the ongoing deleveraging is accomplished.

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