Citigroup Flirts With Breakout On Strong Earnings, But Chart Shows This Flaw

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Citigroup ( C ) reported strong results for the fourth quarter Tuesday and said a $22 billion charge won't change how much money it plans to pay out to shareholders. The bank stock flirted with a buy point, but has been lagging the general market in recent weeks.

[ibd-display-video id=3086231 width=50 float=left autostart=true] Estimates : EPS to rise 4.4% to $1.19 as revenue grows 0.5% to $17.09 billion, according to Zacks Investment Research.

Results : EPS of $1.28, excluding a charge of $8.43 a share related to the tax law, on revenue of $17.3 billion. Global consumer banking revenue grew 6% to $8.4 billion. International clients group revenue dipped 1% to $8.1 billion, as fixed income trading revenue sank 18% to $2.4 billion while banking revenue climbed 14% to $4.7 billion.

While Citigroup booked a $22 billion charge to account for the tax changes, the effect on capital that regulators scrutinize was "much less significant," said CEO Michael Corbat in a statement, noting the annual bank "stress tests," or Comprehensive Capital Analysis and Review (CCAR), that's used to determine how much in buybacks and dividends banks can pay out.

"Tax reform does not change our capital return goals as we remain committed to returning at least $60 billion of capital in the current and next two CCAR cycles, subject to regulatory approval," he said. "Tax reform not only leads to higher net income and increased returns, but also serves to strengthen our capital generation capabilities going forward."

Stock : Shares rallied 0.5% to 77.22 on the stock market today . Citigroup briefly hit 78.44, above a 78.02 flat-base buy point . But Citi's relative strength line has been in a downtrend and below the base's peak, meaning any breakout has greater odds of failing.

JPMorgan Chase ( JPM ), which beat forecasts Friday, fell 0.4%. Wells Fargo ( WFC ), which turned in mixed results Friday, dipped 0.1%.

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Big-bank and financial earnings pick up steam this week, with Bank of America ( BAC ), Goldman Sachs ( GS ) and Charles Schwab (SCHW) set to release results Wednesday; Morgan Stanley (MS), American Express (AXP) and Keycorp (KEY) Thursday; and Synchrony Financial (SYF) Friday.

Citigroup, as well as Morgan Stanley and Bank of America, said they would take big charges from write-downs of deferred tax assets, which companies can use to ease their tax burden in the event of a loss.

But banks still see long-term benefits from the tax cuts, while long-term yields have risen more than short-term yields recently, allowing banks to capitalize on the spread.


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

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

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