Citigroup Inc. (NYSE:C) is expected to report a 16.2 percent increase on second-quarter profits as its investment banking and securities division look forward to sharp growth due to increasing investments from both retail and institutional customers.
The New York bank will issue its second-quarter results on Monday, before the market opens.
Analysts polled by Thomson Reuters expect Citigroup to report net income of $3.58 billion, or $1.17 per share, on revenue of $19.68 billion, up from the year-earlier period’s net income of $3.08 billion, or $1.00, on revenue of $1.86 billion.
Much of the recent profit looks to come from cost-cutting measures that are aimed at streamlining the business, even though Citi is strengthening its position in some of the 160 countries it has a presence, says Frost and Sullivan analyst Sheetal Kothari.
“Citi continues to strengthen its foothold in Asia and other emerging markets, which account for 30 percent of its profits,” said Kothari.
In addition, Citi’s sale of its remaining shares of Smith Barney to Morgan Stanley will bring in $3.7 billion in cash, with the sale generating $9.4 billion over four years. This is consistent with Citi’s new policy of slimming down its non-core holdings as it looks to gain better flexibility in the changing microeconomic global economy.
Adam Sarhan of Sarhan Capital believes Citi will emerge in a good position after Monday’s announcement, in part because of a “stronger-than-expected housing recovery.”
“In my opinion, Citi will report strong earnings helped by a growing economy, record-low interest rates in the second quarter, and a stronger-than-expected housing recovery. International demand from Asia, Latin America and the Middle East will also help their bottom line. Earnings have grown double digits in the past two quarters. Another double-digit growth in earnings would continue an already strong trend,” said Sarhan.
Citi’s stock is now flirting with a four-year high of $52.30 after the 2008 meltdown ($37.70) and its 2009 bottom price of $10.30.
While most analysts say that Citi could approach a bullish $54 per share, Charles Peabody of Portales Partners is almost alone in his analysis that Citi’s overseas operations could conspire against them. With around 30 percent of Citi’s profits being generated outside of the U.S, any increase in the dollar against the Yen, Euro or currencies in emerging markets could mean trouble.