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Citigroup: What to Expect in Q1

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Low growth expectation

Citigroup (C) is scheduled to announce its first-quarter results before the markets open on April 15. We expect market sensitive products to continue to hurt the bank’s revenue growth rate. However, the net interest income will likely improve following growth in loans and deposits. Credit offtake is expected to drive Citigroup’s net interest income in 2019 even in the absence of a rate hike. Management expects the net interest income to grow as much as or more than $2 billion in 2019, which is encouraging.

Reduced expenses, improved asset quality, and share repurchases will likely drive Citigroup’s bottom-line growth. However, the earnings growth rate is expected to decelerate in the absence of any significant boost from the lower effective tax rate and tough comparisons.

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Analysts’ consensus estimate

Analysts expect banks to report low growth in 2019 due to the Fed’s pause on the rate hikes and more competitive activity. Challenges in market sensitive products could remain a drag. Analysts expect JPMorgan Chase’s (JPM) revenues to stay flat in the first quarter.  Wells Fargo (WFC), Morgan Stanley (MS), and Goldman Sachs’ (GS) revenues are projected to decline. Bank of America (BAC) could continue to benefit from growth in loans and deposits. However, the revenue growth rate is expected to be low.

Analysts expect Citigroup to post revenues of $18.6 billion, which implies a YoY (year-over-year) decline of 1.2%. Analysts expect the earnings to be $1.80 per share, which implies 7.1% growth YoY. Share buybacks and lower expenses are expected to support the bank’s earnings.

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