Fourth-quarter expectations

Citigroup (C) is scheduled to announce its fourth-quarter results on January 14. Citigroup has a strong record of beating analysts’ earnings estimates. The bank has beat analysts’ estimates in the past seven quarters with an average surprise of 5.9%.

For the fourth quarter, Citigroup is expected to post an adjusted EPS of $1.58, which implies a YoY (year-over-year) increase of 23.4%. Analysts expect other major banks to mark strong double-digit growth in their EPS. The increased net interest income, a lower effective tax rate, and a decline in the outstanding share count will likely drive the bottom line.

Will Citigroup Beat Analysts’ Fourth-Quarter Expectations?

Analysts expect JPMorgan Chase’s (JPM) EPS to increase ~27% in the fourth quarter. Bank of America (BAC) and Wells Fargo’s (WFC) bottom lines are expected to increase 34% and 23%, respectively.

Growth drivers

Citigroup’s fourth-quarter earnings growth is expected to come from a considerable decline in the effective tax rate and the lower outstanding share count. Lower expenses and the cost of credit could cushion the bank’s bottom line. A higher net interest margin will likely support the bottom-line growth.

We expect banks (XLF) to report higher net interest margins due to the four rate hikes in 2018. Citigroup’s bottom line is projected to benefit from the Fed’s hawkish monetary policy.

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