Citigroup Inc. (NYSE: C) shares weakened last week despite the fact that this bank reported better than expected second-quarter earnings.
Fundamental analysis: Citigroup’s outlook remains stable
Citigroup reported its second-quarter results on Wednesday; total revenue has decreased by -11.6% Y/Y to $17.47 billion, while the GAAP EPS was $2.84 (beats by $0.88). Total revenue has decreased below the expectations (beats by $290 million), and the bank’s management expects the accelerating trends in the third quarter.
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Citigroup reported $6.2 billion in net income for the second quarter, and it is important to mention that for the first two quarters of 2021, Citigroup returned close to $7 billion to its shareholders (this was the maximum amount permitted under the Federal Reserve’s rules). CEO Jane Fraser said that the pace of the global recovery is exceeding earlier expectations, and because of this, the outlook for bank returns is significantly more favorable currently than even a few months ago.
CEO Jane Fraser also said that the Investment Banking franchise continues to perform well with good momentum in M&A and a very solid pipeline ahead for the rest of the year. The business of the bank continues to be impacted by lower rates, but the U.S. Federal Reserve is forecasting two interest-rate hikes before the end of 2023.
“We are continuing to see robust client engagement and strong underlying growth in our fee businesses across the franchise, including TTS, Investment Banking, Securities Services, Commercial Banking, and the Private Bank. And excluding the markets-related component, non-interest revenues were up 24% this quarter, and we are confident in our outlook for continued strong fee growth in the back half of the year,” said Mark Mason, CFO of Citigroup.
Citigroup continues to respond to the needs of its clients in the best possible, and it established a “digital assets group” to offer clients access to cryptocurrencies. Citigroup’s outlook remains stable, and with a market capitalization of $138 billion, shares of this bank are reasonably valued.
Citigroup is currently trading at a forward P/E ratio of only 8.38, the book value per share is around $90, and shares of this bank have a low-risk exposure with good upside potential.
Technical analysis: $60 represents a strong support level
Citigroup shares have weakened more than 15% since the beginning of June 2021; still, according to technical analysis, the bulls remain in control of the price action for now. Rising above $75 supports the continuation of the bullish trend, and the next price target could be located around $80.
On the other side, if the price falls below $65, it would be a “sell” signal, and we have the open way to $60.
Citigroup reported better than expected second-quarter earnings, and CEO Jane Fraser said that the outlook for bank returns is significantly more favorable currently than even a few months ago. Citigroup reported $6.2 billion in net income for the second quarter, even though the bank’s business continues to be impacted by lower rates.
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