Citigroup kicks off Q4 earnings season on a strong note

5 minutes to read

Peter Garnry

Chief Investment Strategist

Summary: Shares of Citigroup are up 4% after the new York-based bank posted strong Q4 earnings.

The Q4 earnings season started in good spirits with Citigroup reporting strong results in its consumer and commercial banking divisions. All geographies show strong performance and management sounded quite optimistic on the conference call, further bolstering investor sentiment.

Citigroup's CFO stated that the bank does not see any impact yet from the US government shutdown and it remains positive for 2019. No big surprises here, of course – I have never heard of any CFO predicting a downturn before the fact. Nevertheless, Citi shares were up 4% following a soft start as the initial miss in the trading business spooked pre-market traders.

Citi shares, weekly — Citigroup weekly, five-year view (source: Saxo Bank)

The two most encouraging signs in Citigroup’s business besides its strong ROTE above cost of capital were the stable net interest margin (see slides below) and no meaningful uptick in credit costs in any region of its consumer banking divisions.

Citigroup net interest revenue & margin — Source: Citigroup

Last Friday, we wrote an earnings preview in which we highlighted the most important earnings releases this week (out of the 50 earnings releases expected). We continue to expect US earnings to outstrip those in Europe and Asia where we expect real weakness with European earnings growth potentially slipping into negative territory.

Today sees UnitedHealth, JPMorgan Chase, Delta Air Lines and Wells Fargo as the most important releases to watch. JPMorgan Chase should most likely be a repeat of Citigroup’s results. From a macro perspective, Delta Air Lines is the most interesting.

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