by SignalFactory · October 12, 2020 | 14:01:21 UTC
Increase in client activities and rise in market volatility on the prevalent coronavirus concerns are likely to have aided Citigroup’s C trading revenues (both equity and fixed-income), driving third-quarter 2020 earnings, slated for an Oct 13 release.
The coronavirus-pandemic-induced global economic slowdown raised investors’ concerns, while the Federal Reserve’s efforts and support from the government’s stimulus package acted as tailwinds. Thus, equity markets performed well during the quarter, with the fixed income markets witnessing a strong performance.
At a conference held last month, the company’s chief financial officer (CFO) Mark Mason said fixed income and equity revenues are likely to be up in the low double-digit range, year over year.
Other Factors at Play:
Low Consumer Banking Revenues: Citigroup is expected to have witnessed strained consumer banking revenues due to reduced levels of consumer activity. Global card fees might have been hurt considerably on lower consumer spending.
Decent Investment Banking (IB) Fees: Global M&A activity was impressive during the July-September quarter as dealmakers across the globe were active during this period with rising M&A deal value and volume. Therefore, this might have had a positive impact on Citigroup’s advisory fees.
Moreover, IPO activities were strong, and as companies tried to build liquidity to tide over the pandemic-induced crisis, there was a substantial rise in follow-up equity issuances.
Also, equity market performance was strong and overall debt issuances were on an upswing given the lower interest rates. Thus, equity underwriting, and debt origination fees are expected to have gone up in the quarter under consideration.
Overall, the consensus estimates for IB fees of $1.19 billion indicates an 11.9% fall from the previous quarter’s reported number.
At last month’s industry conference, CFO Mason also mentioned the expectations of subdued investment banking revenues.
Muted Net Interest Income (NII) Growth: The Federal Reserve’s move to lower interest rates to near-zero level in March in a bid to support the U.S. economy from the coronavirus pandemic-induced slowdown might have dampened the bank’s net interest margin.
Also, per the Fed’s latest data, the rise in loans might have been low during the quarter under review. Particularly, weakness in revolving home equity and consumer loans, along with commercial and industrial (C&I), are expected to have offset growth in commercial real estate loans. Apart from these, coronavirus concerns have hurt business sentiments across industries, which might have affected loan demand.
Therefore, a soft lending scenario is likely to have curtailed growth in Citigroup’s net interest income to some extent.
The Zacks Consensus Estimate for NII of $2.14 billion suggests an 18.9% decline from the year-ago quarter.
Rise in Expenses: Per Citigroup’s CFO, the bank would be accelerating investments in infrastructure and controls with $1 billion in additional investments intended for this year. Therefore, expenses are anticipated to be approximately flat to up slightly in the to-be-reported quarter compared with the prior quarter.
High Reserve Build: At a virtual conference last month, for the July-September quarter, Mason predicted additional reserves, though lower than the previous quarters, based on the prevailing macroeconomic concerns, including the sluggish pace of economic recovery.
Here is what ZAKS quantitative model predicts:
Citigroup does not have the right combination of the two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — for increasing the odds of an earnings beat.
Earnings ESP: The Earnings ESP for Citigroup is +1.84%.
Zacks Rank: Citigroup currently carries a Zacks Rank of 4, which decreases the predictive power of ESP.
All information on this website is of a general nature. The information is not adapted to conditions that are specific to your person or entity. The information provided can not be considered as personal, professional or legal advice or investment advice to the user.
This website and all information is intended for educational purposes only and does not give financial advice. Signal Factory is not a service to provide legal and financial advice; any information provided here is only the personal opinion of the author (not advice or financial advice in any sense, and in the sense of any act, ordinance or law of any country) and must not be used for financial activities. Signal Factory does not offer, operate or provide financial, brokerage, commercial or investment services and is not a financial advisor. Rather, Signal Factory is an educational site and a platform for exchanging Forex information. Whenever information is disclosed, whether express or implied, about profit or revenue, it is not a guarantee. No method or trading system ensures that it will generate a profit, so always remember that trade can lead to a loss. Trading responsibility, whether resulting in profits or losses, is yours and you must agree not to hold Signal Factory or other information providers that are responsible in any way whatsoever. The use of the system means that the user accepts Disclaimer and Terms of Use.
Signal Factory is not represented as a registered investment consultant or brokerage dealer nor offers to buy or sell any of the financial instruments mentioned in the service offered.
While Signal Factory believes that the content provided is accurate, there are no explicit or implied warranties of accuracy. The information provided is believed to be reliable; Signal Factory does not guarantee the accuracy or completeness of the information provided. Third parties refer to Signal Factory to provide technology and information if a third party fails, and then there is a risk that the information may be delayed or not delivered at all.
All information and comments contained on this website, including but not limited to, opinions, analyzes, news, prices, research, and general, do not constitute investment advice or an invitation to buy or sell any type of instrument. Signal Factory assumes no responsibility for any loss or damage that may result, directly or indirectly, from the use or dependence on such information.
All information contained on this web site is a personal opinion or belief of the author. None of these data is a recommendation or financial advice in any sense, also within the meaning of any commercial act or law. Writers, publishers and affiliates of Signal Factory are not responsible for your trading in any way.
The information and opinions contained in the site are provided for information only and for educational reasons, should never be considered as direct or indirect advice to open a trading account and / or invest money in Forex trading with any Forex company . Signal Factory assumes no responsibility for any decisions taken by the user to create a merchant account with any of the brokers listed on this website. Anyone who decides to set up a merchant account or use the services, free of charge or paid, to any of the Forex companies mentioned on this website, bears full responsibility for their actions.
Any institution that offers a service and is listed on this website, including forex brokers, financial companies and other institutions, is present only for informational purposes. All ratings, ratings, banners, reviews, or other information found for any of the above-mentioned institutions are provided in a strictly objective manner and according to the best possible reflection of the materials on the official website of the company.
Forex trading is potentially high risk and may not be suitable for all investors. The high level of leverage can work both for and against merchants. Before each Forex investment, you should carefully consider your goals, past experience and risk level. The opinions and data contained on this site should not be considered as suggestions or advice for the sale or purchase of currency or other instruments. Past results do not show or guarantee future results.
Neither Signal Factory nor its affiliates ensure the accuracy of the content provided on this Site. You explicitly agree that viewing, visiting or using this website is at your own risk.
