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Citigroup’s Q4 Revenue Miss Could Hurt Its Stock

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Key takeaways

Citigroup (C) reported mixed fourth-quarter results on January 14. The bank’s total revenues benefited from continued growth in deposit spreads. However, the total revenues fell short of analysts’ estimate. The decline in fixed-income markets YoY (year-over-year) had a negative impact on the revenues. Lower deposit volumes remained a drag. Earlier, management indicated the expected sequential slowdown in its ICG (Institutional Clients Group) segment, particularly fixed-income market revenues.

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Despite subdued revenues, Citigroup’s bottom line marked double-digit growth due to lower expenses, a decline in the effective tax rate, and share repurchases. Including the fourth quarter, Citigroup has beat analysts’ earnings estimates for eight consecutive quarters. Citigroup stock was trading 1% lower during the pre-market session.

Key numbers

Citigroup reported total revenues of $17.1 billion, which fell short of analysts’ estimate of $17.6 billion and decreased ~2% on a YoY basis. By business segments, the Global Consumer Banking segment’s revenues remained flat. The decline in Asia offset the growth in North America and Latin America.

The ICG segment’s revenues declined 1%, which reflected weakness in fixed-income markets’ revenues and a decline in investment banking revenues due to the lower underwriting fee.

Citigroup reported an adjusted EPS of $1.61—up ~26% on a YoY basis. Including a one-time benefit, Citigroup reported an EPS of $1.64.

Analysts expect major banks including JPMorgan Chase (JPM) and Bank of America (BAC) to report strong earnings growth due to higher deposit spreads, lower expenses, a decline in the tax rate, and share repurchases.

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