According to the news report by CNBC, Citigroup, the parent company of Citibank, was the first of the major American banks to release its quarterly earnings results. While the bank beat market expectations in terms of profit, it missed estimates on revenue due to weakness in trading in the last part of 2018.
Citigroup’s revenue dropped by 2% to $17.1 billion. The market expectation had been that the bank would deliver revenues of $17.6 billion.
Despite missing revenue expectations, the company’s shares went up by 4%.
Citi’s shares fell when the earnings results were announced. However, towards the end of the day, the company’s shares went up by as much as 4.5% to trade at $59.23 per share. The company’s shares closed the day at $58.93 per share.
According to Jim Cramer, the host of Mad Money on CNBC, the bank’s performance in the stock market after it released its fourth quarter results just went to show that investors did not need to fear as much as they thought.
Citigroup, during its conference call with analysts, stated that the fall in the major averages was tied to fears related to earnings in 2019 as well as the slowdown in the Chinese economy. Cramer stated that these fears actually overshadowed the real performance of the company.
Citigroup’s Chief Executive Officer Michael Corbat stated that the company’s management observed the discrepancy between what they saw in the bank’s business vis-à-vis what the markets were saying. Corbat also stated that the management found no evidence that the economy was slowing down.
The CEO said that the biggest risk that the markets were facing was that they could talk themselves into a recession instead of letting the basic fundamentals take them there.
Overall, Citigroup showed better-than-expected results and the CEO felt that investors were having an overreaction due to fears about a global economic slowdown and trade.
Citigroup saw an increase in quarterly profit from $3.7 billion, which is $1.28 per share, from the same time a year ago, to $4.2 billion, which is $1.61 per share. This number excluded a one-time tax credit the company saw. The market expectation had been that the company would make a profit of $1.55 per share.
He said that there was only one real negative in the company’s quarterly results – the 21% year-on-year decline in the volume of trade in its markets and securities division. Because of this, the quarterly performance of the bank appeared weak.
However, Corbet said, trading did not reflect the real economy, which was strong for the company.
The host of Mad Money said that Citi also had a number of drivers that would help keep up momentum in earnings. The bank initiated a share repurchase program, has a strong global presence and has a cash management division that is not only growing fast but is also low on risk.
According to the news report by Reuters, Citigroup’s Chief Financial Officer John Gerspach stated that the company would make $2 billion more in 2019 than in 2018 via from its lending businesses.
Gerspach highlighted the company’s increasing earnings from its consumer banking division as well as the reduced government tax on deposit insurance. He said that these would be the drivers that would push up their net income for 2019.
The CFO also said that the US economy was doing well, as were global economies. China’s slowing economy was not going to impact Citigroup’s business, according to him.
Citigroup also stated that it had not yet felt any impact from the partial government shutdown, however, that could change if the stalemate continued.