Citigroup earnings beat expectations on 49% fixed-income trading surge

Key Points
  • Citigroup reported fixed-income trading revenue of $2.9 billion, easily surpassing a FactSet estimate of $1.24 billion.
  • The bank's global consumer business also grew by 5% to $8.5 billion as branded credit cards sales expanded by 10% in the fourth quarter.
Citigroup reports beats on top and bottom lines for fourth quarter
Citigroup reports beats on top and bottom lines for fourth quarter

Citigroup reported Tuesday quarterly results that easily beat analyst expectations, driven by strong fixed-income trading revenues along with growing sales from the bank's consumer business.

Here's what the banking giant reported vs. what Wall Street analysts expected:

  • Earnings: $1.90 per share vs. $1.84 per share expected by Refinitiv
  • Revenue: $18.378 billion vs. Refinitiv forecast of $17.855 billion
  • Fixed income trading: $2.9 billion vs. FactSet estimate of $1.24 billion
  • Equities trading: $516 million vs. $673.7 million forecast

The stock rose 1.6% Tuesday.

Citigroup's bond-trading revenues represent a 49% surge from the year-earlier period. The bank said the strong results reflect a recovery from the fourth quarter of 2018 along with "strong performance, particularly in rates and spread products."

That strong result, however, was slightly offset by a 23% decline in equity trading as the derivatives environment becomes "more challenging," Citi said.

The bank's consumer business also boosted its results, as its global consumer banking division raked in $8.5 billion in sales. That's a 5% increase from the year-earlier period.

CEO Michael Corbat highlighted Citigroup's Branded Cards business, which saw its revenue grow by 10% to $2.4 billion.

"The U.S. consumer franchise saw continued strong growth in Branded Cards and sustained its momentum in attracting digital deposits," he said in a statement. "Our earnings of $5 billion for the fourth quarter marked a strong finish to 2019."

The company also posted a full-year profit of $8.04 per share, which represents a 21% rise from 2018.

Citigroup shares are coming off their best year since 1999, surging more than 53% in 2019. Those gains outpaced those of rival banks J.P. Morgan Chase, Wells Fargo and Bank of America. J.P. Morgan and Bank of America both rose more than 40% last year, while Wells Fargo advances just 16.8%.

Wells Fargo banking analyst Mike Mayo raisedhis price target on the stock last month to $97 per share from $85 per share, telling CNBC's "Fast Money" it's his favorite banking stock "because it's just so inexpensive and they're buying back so many stock." Goldman Sachs also added Citigroup to its conviction buy list last week while Bank of America called it its "pick of the decade."

J.P. Morgan Chase reported fourth-quarter earnings earlier on Tuesday, topping analyst expectations as its bond-trading revenue skyrocketed by nearly 90%. The bank also posted a record profit for 2019. Wells Fargo's results on Tuesday fell short of predictions.

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