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Citigroup To Report Flat Q1 Earnings After Stress Test Miss

 April 16, 2012 02:02 AM

(by Mani) Citigroup, Inc. (NYSE:C) is expected to report flat earnings on marginal growth in revenues when it reports its first-quarter numbers on April 16.

Wall Street expects earnings of $1 a share, flat with last year, according to analysts polled by Thomson Reuters.

Analysts expect the business conditions at Citigroup to improve. In the past 60 days, consensus earnings estimates have increased from 93 cents a share to $1. During the last seven days, 10 analysts have revised their earnings estimates on Citigroup.

Citigroup has managed to top Street consensus estimates 3 out of the past four quarters. In the last quarter, the company missed earnings by a wide margin of 18 cents.

[Related -Bank Stocks: The Misbegottenness of the Volcker Rule Truly Knows No Bounds]

Out of the past four quarters,Citigroup posted profit increases in second and third quarter of2011, while its profits fell in the first and fourth quarter of 2011.

Meanwhile, 18 Wall Street analysts, on an average, are estimating Citigroup to grow its quarterly revenues by 0.6 percent to $19.85 billion. In the year-ago period, the company generated revenue of $19.73 billion.

In addition, several Wall Street analysts have a positive stance on the company. Out of 27 analysts covering Citigroup, 19 of them rate as a "buy" or "strong buy"; 5 of them rate "hold," while 3 analysts have a "sell" rating, according to Thomson Reuters.

In the fourth quarter of 2011, New York based company reported net income of $1.17 billion or 38 cents per share, lower than $1.31 billion or 43 cents per share in the prior-year quarter. Total revenues for the quarter also declined seven percent to $17.17 billion.

[Related -Citigroup Inc (C) Q4 Earnings Preview: What To Watch?]

During the first quarter, investors and analysts spent much of their time researching to predict which regional banks would pass or fail the Federal Reserve's Comprehensive Capital Analysis and Review (CCAR) and estimating the size of dividends and buy backs for those companies that passed these stress tests.

Citigroup failed to clear the stress test as its tier 1 common capital ratio fall to 4.9 percent, which is just shy of the 5 percent minimum capital ratio stipulated by the Fed. Citi is expected to submit a revised capital plan to the Fed later this year after being advised by the regulator that it objected to the company's proposed return of capital to shareholders.

Among the rivals, JP Morgan Chase &Co. (NYSE:JPM) said its first-quarter profit  decreased to $5.38 billion from $5.56 billion last year. However, its earnings per share grew to $1.31 from $1.28, benefiting from lower share count, and topped Street view of $1.18 a share. Total net revenue, on a manged basis, increased to $27.42 billion from $25.79 billion in the same quarter last year. On a reported basis, net revenue rose to $26.71 billion from $25.22 billion a year-ago. Analysts expected revenues of $24.68 billion.

Another competitor Wells Fargo &Co. (NYSE:WFC), said its first-quarter net income applicable to common stock grew 13 percent to $4.02 billion from last year's $3.57billion. Earnings per share grew 12 percent to 75 cents and topped earnings estimate by 2 cents.  Total quarterly revenues grew six percent to $21.64 billion, higher than Street view of $20.46 billion.

On the industry perspective, banks have been working hard to mitigate the lost debit card revenue with the potential upside from these efforts largely excluded from forward expectations. Also, companies are focused internally on cutting costs, and any traction here would boost investors' confidence.

"We feel investors will be keeping a close eye on lending trends given the strength in 4Q11 and managements' net interest margin guidance for 2H12 and '13 in light of the Federal Reserve's comments early in the first quarter about keeping interest rates low until '14," Oppenheimer analyst Terry McEvoy wrote in a note to clients.



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