Bank Stocks Rise as Citi Tops Earnings Estimates

Joe Goldman |

Following the lead of JPMorgan Chase (JPM) and Wells Fargo’s (WFC) strong earnings last week, Citigroup (C) delivered an upside earnings surprise of their own Monday morning, extending broad gains throughout the entire banking sector.

Citigroup reported adjusted net income of $3.89 billion, or $1.25 per share, versus the $3.08 billion, or $1.00 per share, from the same period a year ago. Revenue for the quarter was $20.5 billion, as compared to $18.64 billion from the previous year. Analysts were expecting a profit of $1.17 per share on revenues of $19.73 billion.

“Our businesses performed well during the quarter and these results are well balanced through our products and geographies, especially in the emerging markets, where growth is being challenged, said CEO Michael L. Corbat.



Coming into the earnings report there had been growing concerns that Citigroup is overexposed and over-reliant on the strength of emerging markets and foreign currencies, as the company earns 58 percent of its revenue from outside of North America. Charles Peabody of Portales Partners even went so far to predict that Citigroup would lose $5-7 billion on a currency trade.

While many investors still believe Citigroup is hindered by its immense exposure to slowing international markets, these fears are yet to come to fruition. Citigroup’s earnings were impressively strong, indicating that the company may be able to make money in almost any global economic environment.

Investors also applauded Citigroup’s efforts to slim down its balance sheet. The company shed $18 billion worth of assets, including the last of its stake in Morgan Stanley Smith Barkley and lending units in Turkey and Uruguay.

Citigroup’s investment banking segment was the company’s best performer for the quarter, delivering a 63 percent earnings jump to $2.4 billion.

Citigroup shares rose 1.85 percent to $58.75 during trading on Monday, while iShares Dow Jones US Financial Services ETF (IYG) gained around one-half of a percent, Bank of America (BAC) rose 0.73 percent, Wells Fargo rose 1.31 percent, and JPMorgan Chase shed 0.47 percent. Trading on Citigroup’s huge investment banking gain, Goldman Sachs (GS) rose 1.54 percent and Morgan Stanley (MS) gained 1.80 percent.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
C Citigroup Inc. 67.60 -0.38 -0.56 22,647,231 Trade
MS Morgan Stanley 47.09 0.13 0.28 9,439,318 Trade
JPM JP Morgan Chase 91.55 -0.38 -0.41 12,328,590 Trade
GS The Goldman Sachs Group Inc. 221.48 -0.77 -0.35 2,812,484 Trade
BAC Bank of America Corporation 24.11 -0.10 -0.41 62,332,265 Trade
WFC Wells Fargo & Company 54.71 -0.20 -0.36 17,352,646 Trade
HYMOF Hyundai Motor Co. Ltd. Pfd Shs Issued 1999 n/a n/a n/a 0

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