Earnings Preview: Will Citigroup’s (C) Corrective Actions Be Reflected in Q2 Report?

For Citigroup Inc. (NYSE: C), 2023 was a significant year, in which it initiated a major organizational restructuring to become a more streamlined and efficient business. In this new phase of its journey, the investment bank is focused on executing on its medium-term goals. The market will be closely watching the upcoming results for updates on the turnaround program.

The banking giant’s shares have been on an upward trend since last year — although they fell to a multi-year low in October 2023 — and have gained about 20% in the past six months. Given its focused restructuring program and aggressive cost-cutting efforts, the company appears poised to deliver strong shareholder value. Given its relatively low valuation, the company is unlikely to disappoint long-term investors.

Positive view

Citigroup will report second-quarter results on Friday, July 12, at 8:00 a.m. ET. Wall Street analysts on average are forecasting $1.41 in earnings per share for the June quarter. The company earned $1.33 per share in the year-ago quarter. The positive outlook reflects an estimated 3.3% increase in second-quarter revenue to $20.08 billion.

More than six months into the new fiscal year, the New York-based company has a new management structure and is moving closer to its goal of streamlining end-to-end processes and strengthening its control environment. Diversification of non-core assets and cost-cutting measures are expected to lift ROTCE starting next fiscal year.

Cost Trend

In recent quarters, Citigroup’s profitability was negatively impacted by one-time charges and restructuring-related expenses. As part of the reorganization, the company has eliminated about 5,000 jobs and reduced the number of management levels from 13 to eight. As the reorganization continues, the goal is to cut 20,000 jobs worldwide over the next two years.

“With a strong balance sheet, ample liquidity and careful risk management, we are well-positioned to support our clients in any situation. We also believe that such situations are our strength. Given how far we are in the process of simplifying and selling assets, 2024 will be a turning point, as we will be able to fully focus on the performance of our five businesses and our transformation. I understand the importance of this year and I am confident that we will see the benefits of the actions we have taken thanks to the dynamics of our businesses.” Jane Frazer, CEO of Citigroup, said this recently during a meeting with analysts.

Mixed Q1

The three-month period ended March 2024 saw weak results Markets AND Wealth Business segments, which together account for a third of revenue, saw total revenue decline 2% to $21 billion. This Services The business performed quite well, continuing the trend seen in FY23. Net income in the first quarter fell to $3.37 billion, or $1.58 per share, from $4.6 billion, or $2.19 per share, in the comparable quarter a year earlier. Both earnings and revenues beat market expectations. Return on equity was 6.6% in the three months, down 290 basis points year-over-year.

Continuing a bullish trend seen last month, the bank’s shares posted modest gains this week. However, they traded mostly lower on Friday after opening at $64.46.