Citigroup Earnings: How it Compares to JPMorgan, Wells FargoVW Staff
Citigroup Inc. (NYSE:C) has risen about 2 percent on April 15 as the bank’s earnings surprised to the upside. Strong revenues ($20.5 Billion versus estimates of $20.15 Billion), EPS per share ($1.23/share versus estimate of $1.18/share), and increases in earnings from all business segments with the exception of transaction services bolstered the stock.
The bank’s capital position strengthened, as the estimated Basel III Tier I Common Ratio was 9.3 percent, up 6bps. New CEO Michael Corbat foresees the ratio reaching 10 percent by year end 2013. Careful expense management helped with profit margins, as operational expenses declined 4 percent quarter over quarter and 1 percent year over year.
Citigroup Inc. (NYSE:C)’s net interest margin rose to 2.94 percent, from 2.93 percent in 4Q12. Concerns over revenue and profit sustainability are still in the minds of investors, as Citigroup has surprised on the upside before, only to under perform in subsequent quarters.
JPMorgan Chase & Co. (NYSE:JPM) (JPM: 48.38) released results on April 12, and earnings were positive for the quarter. However, not all segments generated increased revenues, and the strongest segment – investment banking – carried the results. JP Morgan took advantage of an upswing in debt issuance at low rates and trading revenues experienced tailwinds of strong stock market performance. Profits were also bolstered by lower provisions and non-interest rate expenses. The lack of diversification in revenue growth is a concern, especially with the compression of net interest margins (NIM's).
JPMorgan Chase & Co. (NYSE:JPM)’s outstanding loan portfolio shrank slightly on the first quarter while deposits rose by a small increment. However, interest bearing deposits grew while non-interest bearing deposits declined resulting in an increase in interest expenses. As a result NIM's shrank to 2.37 percent for the quarter – the fifth consecutive quarter decline.
Wells Fargo & Company (NYSE:WFC) (WFC: 36.99) also released results on April 12, and it earned a record $5.2 Billion in revenues and grew earnings per share by 23 percent. Expenses were reduced across the board. Relative to JP Morgan, revenue source was more diverse given reliance in cross selling in retail, wholesale, and wealth management segments.
Wells Fargo’s NIM also declined to 3.48 percent, a 0.80 percent reduction relative to 4Q12. For the quarter and the past year, both JP Morgan and Wells Fargo have relied on mortgage revenue and profitability to bolster margins. For Wells Fargo, mortgage fees comprised 13 percent of revenue.
Citigroup Inc. (NYSE:C) has also benefited from profitable mortgages, but to a lesser extent. As more competition emerges in the mortgage markets, margins could compress negatively affecting banks.