Key Takeaways:
Five of the largest US banks report second-quarter earnings Tuesday, with Citigroup expected to post the strongest year-over-year profit growth at 39%.
"Citigroup's efficiency improvement is the standout story this quarter, but it still has ground to cover to hit its medium-term target," David Chiaverini, an analyst at Jefferies, said. The bank's efficiency ratio is expected to improve to 60% from 62.7% a year earlier, according to consensus estimates compiled by LSEG.
Citigroup is forecast to report earnings of $2.72 per share on revenue of $23.68 billion, a 9.3% increase from a year ago. Book value per share is seen rising to $115.15 from $106.94. The bank's equity markets revenue is expected to reach $1.72 billion, up 6.5% year over year, while net interest income in US personal banking is projected to fall 5.4% to $5.18 billion.
JPMorgan Chase is expected to post 11% earnings growth on roughly 10% higher revenue, while Bank of America's profit is seen rising 27% and Goldman Sachs' more than 30%. Wells Fargo rounds out the group with an expected 12.3% earnings gain on 4.7% revenue growth. Bespoke Investment Group data shows Citigroup tops earnings estimates 81% of the time, while JPMorgan shares have fallen after the last four releases.
The reports kick off what is expected to be a strong earnings season for the finance sector. S&P 500 companies are projected to report 23.8% earnings growth for the June quarter on 11.3% higher revenue, according to FactSet. The finance sector alone is expected to deliver 12.6% profit growth on 8.4% revenue gains, with aggregate earnings at record levels.
The results will test whether the banking sector's momentum can justify equity valuations near all-time highs. Investors will focus on net interest income trends, loan growth — which is expected to be the strongest in nearly three years — and any shift in management guidance on capital returns. Citigroup's ability to narrow the gap to its own efficiency target will be a key metric for shareholders watching the bank's turnaround story.
This article is for informational purposes only and does not constitute investment advice.
