Citigroup Q2 Earnings Beat Estimates, But Revenue Falls 12%

The New York City-based investment bank Citigroup reported better-than-expected earnings for the first quarter, largely driven by the decision to release credit loss reserves, but overall revenue plunged 12%, sending its shares down about 1% on Wednesday.

Citigroup said its net income rose to $6.19 billion, or $2.85 per share in the quarter ended June 30, up from $1.06 billion, or 38 cents per share, a year ago. That was higher than the market consensus estimates of $1.94 per share.

The investment bank’s overall revenue plunged 12%, while loans were down 3%. Global consumer revenue decreased 7% to $6.8 billion on a reported basis and 10% in constant dollars, as continued strong deposit growth and momentum in investment management were more than offset by lower average card loans and deposits spreads across all three regions.

At the time of writing, Citigroup shares traded 0.83% lower at $67.79 on Wednesday.

Citigroup Stock Price Forecast

Twelve analysts who offered stock ratings for Citigroup in the last three months forecast the average price in 12 months of $89.46 with a high forecast of $114.00 and a low forecast of $73.00.

The average price target represents a 32.14% change from the last price of $67.70. From those 12 analysts, ten rated “Buy”, two rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the stock price forecast of $89 with a high of $130 under a bull scenario and $50 under the worst-case scenario. The firm gave an “Overweight” rating on the investment bank’s stock.

Several other analysts have also updated their stock outlook. Jefferies cut the price target to $80 from $85. BMO lowered the target price to $87 from $95. Evercore ISI slashed the target price to $72 from $76. Oppenheimer cut the target price to $114 from $118.

Analyst Comments

“Citi is trading at just 0.7x NTM BVPS implying through the cycle ROE of just 7%, well below our 9% estimate for 2023. We believe the stock is cheap even if expenses related to the Fed/OCC consent order remain elevated. We have modeled in expenses rising to $44B / $43.5B for 2021 / 2022 well above $42B in 2019,” noted Betsy Graseck, equity analyst at Morgan Stanley.

“Citi also has #1 share in Transaction Banking, a business we estimate delivers a ~35% ROTCE for Citi. We believe Citi can add $17 a share in value by disclosing full quarterly details on this business. We bake half in $8, as Citi discloses half of what we would like to see. Citi should get more credit for its global diversification and it’s more resilient wholesale business.”

Check out FX Empire’s earnings calendar