Citigroup Earnings – Street Expects Growth, As Stock Outperforms YTD (NYSE:C)

Citigroup Inc. (NYSE: C) is set to release its second-quarter earnings report tomorrow morning, before the market opens, as a new earnings season kicks into gear. The report arrives amidst widespread expectations of increased profits for major U.S. banks, fueled by strong trading and a rebound in investment banking.

Citigroup’s earnings per share (EPS) is projected to improve by 7% to $1.63, primarily fueled by capital markets activity. Revenue is expected to come in at $20.83billion, a 3.42% increase on the same period Y/Y.

Despite the relative outperformance of Citi's stock YTD, with gains of 24% handily surpassing the S&P 500's 6.67% gain on the period, a 1.73% dip on the week could indicate markets taking a pause before the print.

Analysts are generally optimistic about Citigroup's Q2 performance. There is the expectation that major U.S. banks, including Citigroup, will report increased profits, driven by stronger trading and a revival in investment banking activities. This optimism is largely based on the anticipation of a recovery in mergers and acquisitions (M&A) and strong trading revenues, driven by ongoing macroeconomic and geopolitical uncertainties that can create trading opportunities.

Citigroup's recent performance has been strong, with EPS beats in each of the past four prints. In the first quarter of 2025, the bank reported a net income of $4.1 billion, a 21% increase from the prior-year quarter, with earnings per share reaching $1.96, surpassing analyst expectations of $1.84. The company's revenue rose by 3% year-over-year to $21.6 billion, driven by growth in its five major divisions. The Markets division saw a notable 12% revenue increase, while Wealth revenues surged by 24%. Furthermore, operating expenses decreased by 5%, attributed to lower FDIC assessments and restructuring charges.

Wells Fargo analysts have previously identified Citigroup as their “dominant pick” among large-cap banks, predicting that the stock could double in value over the next three years. This bullish outlook was based on expectations of profit surges, moderated expenses, and a significant reorganization aimed at improving management accountability. The analysts increased their price target for Citigroup to $110 and maintained an “overweight” rating.

While the anticipated growth in trading and investment banking activities is undoubtedly positive, the bear case warrants a look to sense-check risk. The global economic outlook remains uncertain, with potential risks including rising inflation, geopolitical tensions, and supply chain disruptions. These factors could negatively impact trading volumes and investment banking activity, thereby affecting Citigroup's revenue.

The success of Citigroup's reorganization efforts also remains to be seen. While the bank has made progress in streamlining its operations and improving management accountability, challenges remain in fully implementing these changes and realizing their intended benefits.

Key areas of focus will include revenue growth across its various divisions, expense management, the impact of regulatory changes, and the progress of its reorganization efforts. The report will provide valuable clues as to whether Citigroup can sustain its recent momentum and deliver on the optimistic expectations set by the street.