Citi Shares Not Rallying Despite Earnings Beat

Shares in US banking firm Citigroup are trading 1.7% lower pre-market on Monday. Price has remained within a tight block of consolidation since the group reported Q2 earnings in mid-July. This is despite better than expected results.

Citi posted a Q2 EPS of $0.50 versus expectations of $0.36 per share. Overall revenues were also higher than expected at $19.77 billion versus $19.12 billion forecasted.

Trading Revenues Soar

Citi noted a significant increase in trading revenue as the main driver in the earnings beta. This helped offset a slowdown in the company’s consumer banking business. Trading revenues were higher by 68%. This is compared with the same quarter last year with the bank’s Markets and Securities Services revenues higher by 48% to $6.9 billion.

Looking at the breakdown of the earnings report, Citi reported its fixed income, currency, and commodities trading revenue at $5.6 billion versus $4.86 billion forecasted. Meanwhile, equity trading revenue was a little lower at $770 million. This marks a 3% decline on the same period last year.

Citi CEO Praises Strong Performance

Commenting on the earnings results, Citi CEO Michael Corbat said:

“While credit costs weighed down our net income, our overall business performance was strong during the quarter, and we have been able to navigate the COVID-19 pandemic reasonably well. The Institutional Clients Group had an exceptional quarter, marked by an increase in Fixed Income of 68%.”

While the results were mostly positive, the bank’s global consumer banking division struggled in Q2. Revenues fell by 10% to $7.34 billion versus the same period last year. Net credit losses were also higher by 12% rising to $2.2 billion. In total, Citi posted a net income of $1.32 billion in the quarter. This marked a 73% drop versus the same period last year.

Citi CEO Michael Corbat said:

“With a sharp emphasis on risk management, we are prepared for a variety of scenarios and will continue to operate our institution prudently given this unprecedented situation.”

As we have heard from most other companies reporting earnings, good or bad, the COVID-19 crisis has been cited as the main factor causing uncertainty with regard to the future outlook.

Citi Holding Within Bullish Channel

Citi shares continue to trade within the bullish channel which has framed the post-lockdown recovery. However, following a firm reversal from a test of the 61.20 level resistance, price remains anchored towards the lower end of the channel.

While the 48.24 level remains as support, however, focus remains on the continued upside. On the other hand, a downside break of the 48.24 level will turn the focus to the 39.63 level support next.

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