Citigroup (C) delivered better-than-expected results in the third quarter of 2021, driven by strong performances across the investment banking and equity markets, along with lower credit costs.
The investment bank reported adjusted earnings of $2.15 per share for the quarter, much higher than the consensus estimate of $1.80 per share. Also, bottom-line results compared favorably with the $1.36 per share reported in last year’s quarter.
Quarterly revenues of $17.2 billion surpassed Street expectations of $17.1 billion but declined 1% from the prior-year quarter. The fall in revenue was due to a pre-tax loss related to the sale of the Australian consumer business in Global Consumer Banking. Excluding this loss, revenue rose 3%, driven by a rise in equity-market and investment-banking income. (See Citigroup stock chart on TipRanks)
The company reported loans worth $665 billion in the third quarter, almost flat (on a reported basis) compared with the prior-year quarter. Meanwhile, deposits climbed 7% to $1.3 trillion.
Furthermore, the cost of credit in Q3 witnessed a major decline, reflecting a release of allowances for credit loss reserves and an improvement in net credit losses, attributed to an improvement in portfolio credit quality.
Citigroup CEO Jane Fraser said, “We are moving forward with urgency on our top priorities in order to responsibly narrow the returns gap with our peers: the Transformation, refreshing our strategy and building a culture of excellence… We remain committed to returning excess capital over and above the amount necessary to invest in our franchise and to maintain our safety and soundness.”
On October 10, Jefferies analyst Ken Usdin maintained a Buy rating on Citigroup and raised the price target to $87 from $81. The new price target implies 22.9% upside potential.
Usdin is of the opinion that credit card growth will fuel consumer banking growth as the shift from cash to cards continues. Also, consumer fee income is likely to grow at a slower pace.
Furthermore, the analyst expects Citigroup’s share of investment banking and trading to continue to increase. (See Analysts’ Top Stocks on TipRanks)
Consensus among analysts is a Strong Buy based on 8 unanimous Buys. The average Citigroup price target of $89.75 implies 26.8% upside potential from current levels.
Furthermore, Citigroup scores a “Perfect 10” on TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations.