Citigroup Could See Lending and Investment Banking Growth
Core banking performance
In recent quarters, Citigroup (C) has outperformed peer Wells Fargo (WFC) and largely matched Bank of America’s (BAC) and JPMorgan Chase’s (JPM) performance, helped by loan book expansion and investment banking activity. The bank has beaten estimates in the last eight quarters due to growth across its segments.
The recent stock market rout, if extended, could let investors look at fundamentally strong and value buys. The Fed’s hawkish stance has been beneficial for banks (XLF) in recent years. However, the possibility of more than three rate hikes this year imay prompt investors to exit equities. Whereas Citigroup has risen 30% over the past year, it recently fell 7% from its high.
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Performance in 4Q17
In 4Q17, Citigroup posted earnings of $18.3 billion, or $7.15 per share, including a one-time charge of $22 billion related to the Tax Cuts and Jobs Act. Excluding that charge, the bank had earnings of $1.28 per share, beating analysts’ $1.19 estimate. This beat was due to growth in its Global Consumer Banking segment and partially offset by weak trading activity. The bank had total revenue of $17.3 billion, representing 1% growth from 4Q16 and a 5% fall from 3Q17, which was due to weaker Institutional Clients Group revenue.
Lending and trading
Lending activity amid higher rates and correction in the broader market is expected to be a major revenue driver for bankers in 2018. Any spike in volatility or trading could also improve their earnings. Citigroup’s major task could be to improve retail and corporate lending. The bank had a book value of $70.85 and a tangible value of $60.40 on December 31, 2017. In this series, we’ll look at Citigroup’s valuation, fundamentals, and investment opportunities following the recent global market rout.