Consumer banking in focus as Citi gears up for Q3 earnings

Citigroup (C) is currently in the midst of a comprehensive reorganization, mainly involving realignment of the investment banking division and key management changes. After successfully recovering from the big financial crisis, the bank has focused on shedding high-risk assets and enhancing revenues. However, the most crucial aspect of its operation that needs attention is the weakness in the consumer banking division.

When the banking giant unveils its third-quarter results later this week, the market will be looking for earnings of $1.67 per share on revenues of $18.5 billion. The results are expected to be released at 8:00 AM on Friday.

A crucial aspect of the bank’s operation that needs attention is the weakness in the consumer banking division

In the second quarter, Citi’s profit rose sharply and came in above expectations. The bottom-line beat estimates for the fourth consecutive quarter. Revenues increased modestly but missed expectations. Earnings jumped  27% year-on-year to $1.63 per share and revenues moved up 2% to $18.47 billion.

Though muted yields and softness in lending have weighed down on bank stocks in recent months, it was offset by the higher interest rates. Now, the sector has started feeling the heat of the ongoing trade war between the US and China. Citi is particularly vulnerable to geopolitical issues due to its extensive exposure to the international markets. However, inspired by the booming economy, analysts maintain a bullish outlook on the banking industry.

Also see: Citigroup Q2 2018 earnings call transcript 

Citi has been underperforming its peers in the sector. JPMorgan Chase (JPM) is expected to report results for its most recent quarter on October 12 before the opening bell. Goldman Sachs (GS) and Morgan Stanley (MS) will be reporting their third-quarter results on October 16 before the market opens.

Citi shares, currently priced much below most of the other banking stocks, dropped about 5% since the beginning of the year. The shares ended the previous trading session lower but gained modestly in premarket trading Wednesday.

Citigroup earnings beat view; stock dips on revenue miss