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Citi Shares Lower Despite Earnings Beat

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Shares in US banking firm Citigroup are trading and 1.5% lower pre-market on Thursday, despite the group posting a solid set of Q3 earnings this week. Following on from the above-expectations Q2 earnings release back in July, Citi this week posted third-quarter earnings per share of $1.40. This was well above estimates of a $0.91 EPS.

Q3 Earnings Beat

Citi posted revenues of $17.3 billion over the quarter, just above the $17.2 billion Wall Street was looking for. Net income came in at $3.2 billion, well above the $1.8 billion estimate. Despite the headline beat, there were some aspects of the report which raised concerns.

Net credit losses saw a 200% increase on the same quarter last year, rising to $329 million. Furthermore, global consumer banking revenues fell by 13% to $7.2 billion. This is as a result of subdued client spending over the quarter.

CEO praises Positive Results

Commenting on the results, Citi’s CEO Michael Corbat said:

“We continue to navigate the effects of the COVID-19 pandemic extremely well. Credit costs have stabilized, deposits continued to increase, and revenues are up 3% year-to-date. Although Global Consumer Banking revenues remained lower as a result of the pandemic, we did see higher activity in our mortgage and wealth management products.”

Citi Fined Over Compliance Breach  

Citi has been in the spotlight recently over a $400 million fine issued against it by regulators on counts of failing to meet compliance standards within its risk control management. The fine was issued to Citi despite it having announced earlier in the year that it was pumping $1 billion into improving its infrastructure. However, the bank has admitted that it still has work to be done.

On this matter, Corbat said:

“We are committed to thoroughly addressing the issues contained in the Consent Orders we entered into last week with the Federal Reserve and the Office of the Comptroller of the Currency.”

In all, this was a positive set of results for Citi. It reflects a firm rebound in activity and performance following the Q2 lull amidst the height of the pandemic. Looking ahead, the key question now is, of course, linked to the path of the pandemic over the winter. How will the US government, as well as other global governments, choose to address the situation?

Citi Shares Turning Lower Again

citi shares

Following the breakdown below the rising channel which had framed the recovery off year to date lows, Citi shares had started to recover over the last fortnight.

However, price is now turning lower once again putting the focus back on a test of the 39.63 level. Should this level break, the year to date lows will then come back into focus.

To the upside, bulls will need to see a break of 48.24 to alleviate bearish pressure.

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