Despite beating the initial forecasts, Citigroup's earnings report for Q2 was welcomed with mixed feelings amongst investors and a muted reaction in the stock market exemplified this uncertainty, as the share price was not able to break above the previously demonstrated major resistance level (you can read more about it here) and continued to consolidate just below it.
The financial institution reported a net income of $4.8 Billion, which amounts to £1.95 per diluted share. Excluding the pre-tax Tradeweb gain, the earnings per share were reported at $1.83, which still exceeded the initial forecasts of just $1.78 EPS. The revenue of $18.8 Billion also exceeded the registered revenue of $18.5 Billion for the second quarter of 2018.
The CEO of Citigroup, Michael Corbat, said that:
“We navigated an uncertain environment successfully by executing our strategy, and by showing disciplined expense, credit and risk management. […] We have good momentum and solid growth across our consumer franchise, partially in the U.S., while in the ICG, our industry leading Treasury and Trade Solutions business continues to perform well and we gained share in market-sensitive products such as Investment Banking.” [source]
Despite his upbeat commentary and exhibited trust in the company’s disciplined spending policy, the actual report shows that total expenses and losses grew marginally as well, which had the hampering effect of partially offsetting the reported growth, and also discouraging investors from jumping right into the stock.
“Revenues increased 2% from the prior-year period, reflecting an approximately $350 million pre-tax gain on Citi’s investment in Tradeweb (an electronic trading platform) within Fixed Income Markets and higher revenues across Global Consumer Banking (GCB), partially offset by declines in Investment Banking and Fixed Income and Equity Markets revenues, as well as mark-to-market losses on loan hedges” [source]
Thus, the share price of the company initially dipped with $1.65 to 70.08 after the release of the report, but then found the necessary support and went on to offset the majority of these initial losses by finishing Monday’s trading session just 0.08 per cent lower than the opening price.
Image source: Trendsharks ©, created with TradingView.com
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