Citigroup expenses to be in focus as bank’s earnings season starts

Bloomberg

Citigroup Inc is the first big US bank to report second-quarter earnings when its latest results come out. Investors will be keeping a close eye on how tightly the bank reined in expenses, and how its international businesses fared, as weak trading revenues are already anticipated.
Citigroup CFO Mark Mason said second-quarter fixed-income and equities trading revenue would likely fall by a “mid-single-digit” percentage range from a year ago, while investment-banking fees were expected to drop in the “mid-teens.” Morgan Stanley sounded a warning bell on trading then.
“Weakness in trading revenues could be offset by controlled expenses,” Barclays analyst Jason Goldberg wrote in a note previewing the second quarter. If revenues remain soft, Barclays will look to see whether Citigroup adjusts its 2019 expense guidance from “flattish” to down. Relative to the first quarter, Goldberg expects higher net interest income, driven by balance sheet growth; little change in net interest margin (NIM); higher tech and marketing costs; higher provisions, though “still benign” credit metrics; a higher tax rate and a lower share count.
Any signs from Citigroup’s international business “will be watched closely — Mexico and Asia in particular,” Bloomberg Intelligence’s Alison Williams said. Citigroup’s “forward look and management’s take on the macro backdrop” will be key for Credit Suisse’s Susan Roth Katzke, along with “global GDP growth, capital markets health and of course, the cost of the yield curve shift.”