Strong financial performance
Citigroup (C) impressed investors with its financial performance in 2018 due to higher net interest revenues, lower costs, and a decline in the effective tax rate. Improved revenues and efficiency savings drove the bank’s bottom line, which beat analysts’ estimate in the past eight quarters.
As of February 14, Citigroup stock has risen 19.9% in 2019. Citigroup has outperformed the top US banks with its returns. Bank of America (BAC), which also impressed investors with its stellar performance, recorded 15.2% growth in its stock on a YTD basis. Goldman Sachs (GS), JPMorgan Chase (JPM), and Wells Fargo (WFC) shares have risen 15.3%, 4.9%, and 5.3%, respectively.
We expect Citigroup to sustain the growth momentum in 2019 even in the absence of incremental benefits from rate hikes. Growth in the loan portfolio and deposits are expected to drive the net interest revenues. However, the company’s first-quarter revenues could be weak. Challenges in market-sensitive products and legacy winding down could remain a drag.
Higher net interest revenues, an anticipated decline in operating expenses led by efficiency savings, and share repurchases are expected to drive double-digit growth in Citigroup’s bottom line.
We expect Bank of America to also sustain its momentum in 2019 due to continued growth in lending and deposits and lower expenses. We expect top US banks (XLF) to continue to grow their loan portfolios, which will likely drive their net interest revenues. Operating leverage and share buybacks are expected to support the bottom-line growth.