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.

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Companies

Symbol Name Price Change % Volume
C Citigroup Inc. 60.04 -0.11 -0.18 22,804,941
MS Morgan Stanley 43.73 0.15 0.34 12,115,063
JPM JP Morgan Chase 85.49 0.37 0.43 14,567,202
GS The Goldman Sachs Group Inc. 241.85 0.40 0.17 5,456,047
BAC Bank of America Corporation 23.09 0.14 0.61 130,590,406
WFC Wells Fargo & Company 57.14 -0.15 -0.26 20,331,186
HYMOF Hyundai Motor Co. Ltd. Pfd Shs Issued 1999 n/a n/a n/a 0

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