Citigroup (NYSE:C) is expected to release its first quarter earnings next Monday, and the global banking group could use some good news to counter the disappointment after it recently failed the Fed’s stress test. We believe that business has improved over the quarter due to better economic conditions driving growth across its various business units. What remains to be seen is how well Citigroup’s figures hold up in the face of high expectations from JPMorgan Chase and Wells Fargo’s results due this Friday.
We maintain a $35 price estimate for Citigroup’s stock, which is around its current market price.
Citigroup’s Global Markets Business Remains in Focus
Citigroup’s sales & trading operations, reported under its Global Markets business, are expected to show a turnaround this quarter after a dismal performance in the second half of 2011. The improvement in the global debt and equity markets are largely to thank for this. Bond trading, as well as currencies and commodities trading, are expected to lead revenue growth for the period.
The Global Markets business will also report two significant one-time gains from the sale of its stake in China’s Shanghai Pudong Development Bank (see Citigroup Sheds Stake in Pudong Bank For $369 Million Profit) and India’s Housing Development Finance Corp. (HDFC).  The Pudong stake sale will raise the bottom-line by $349 million, while the HDFC stake sale should add an additional after-tax gain of $1.1 billion.
Developing Countries Should Drive Consumer Banking Performance
Citigroup’s consumer banking business is expected to show an improvement in its loan portfolio, largely on the back of emerging markets growth. We expect that Citigroup’s geographically diversified consumer banking business added in Asia and South America will offset weakness in Europe.Notes:
- Citigroup Exits Investment in Indian Mortgage Firm With $1.9 Billion Sale, Bloomberg, Feb 23 2012 [↩]