Q2 Preview: Citi's (C) Performance in Capital Markets Will Be In Focus

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Shares of JPMorgan ( JPM ) and Citi ( C ) are leading the Financial sector higher Friday as investors are responding to second-quarter results from both JPMorgan and Wells Fargo ( WFC ). On Monday, Citi is set to kick-off the heart of the earnings season with its quarterly figures.

Analysts are looking for Citi to report second-quarter earnings of 89 cents per share on sales of $18.76 billion. The bank posted earnings of $1.28 per share last quarter and $1.11 per share in the second quarter of 2011.

According to our Earnings History page, Citi has missed analysts' estimates by about 1 percent over the last year and a half.

Data from our Ratings History page shows 12 sell-side analyst firms with a Buy rating on the stock, four with a Neutral rating, and two suggesting to Sell.

Analyst Commentary:

  • JPMorgan - While the firm didn't offer much insight into Citi's upcoming results, it noted increased capital return this year "had been a key catalyst for the stock in 2012 and the Fed's recent refusal to approve Citi's capital return plan and Citi's decision to not ask for return in the resubmission pushes this out to 2013." JPMorgan also pointed to continually increasing risks related to litigation and regulation.

    On a longer-term basis, JPMorgan likes Citi given: "(1) attractive valuation with the shares trading below tangible book value; (2) strong and growing capital levels; (3) revenue growth opportunities led by its emerging markets franchise
    (40% of Citigroup revenues in 2011); (4) sizable amount of loan loss reserves; and (5) long run potential for return of excess capital to shareholders."

    The firm recently reduced Citi's Q2 EPS estimate from $1.04 to $1.03. Maintains a Neutral rating into the results.

  • Deutsche Bank - Looking for EPS of 78 cents excluding CVA/DVA. The firm is modeling for a $242 million after-tax loss on the reduction of the bank's Akbank stake, $250 million in litigation costs and a $250 million mortgage putback loss. Sees a $1 billion loan loss reserve release and $100 million in private-equity gains.

    Deutsche Bank believes capital markets continued to be a key driver for Citi over the last quarter. Sees expenses declining about $300 million "given lower
    expected litigation costs (of $250m vs. $545m in 1Q), the absence of a $66m
    repositioning charge in 1Q, and likely lower IB-comp accruals in 2Q."

    The firm maintains a Buy rating on Citi shares.
Citi generally reports right at 8am ET. Tune in to our Earnings category to get an analysis of the bank's results just seconds after the official release.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Earnings , Stocks
Referenced Symbols: C , JPM , WFC

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