Tensions are no doubt running high tonight at Citigroup. The latest crop of quarterly numbers from JP Morgan and Goldman have raised the stakes for Citi and it’s chief executive, Vikram Pandit. Most expect that it will not be able to match the promise of its Wall Street rivals.
Analysts predict that Citi will report a net loss this quarter when it delivers its first-quarter results before tomorrow’s opening bell. According to current consensus estimates, analysts expect a loss of $1.39 billion, or 34 cents a share. If they’re right, that will be six consecutive quarters–a year and a half–of losses for Citi. Total losses so far have already amounted to $28 billion.
Much of the attention will be on how deep Citi’s credit writedowns and credit card chargeoffs cut. If Citi’s writedowns don’t go deep enough, analysts will howl that it is covering up losses and refusing to face reality. Expect Citi executives to be questioned about whether the suspension of mark-to-market accounting materially affected its results. JP Morgan said it made no difference. Can Citi say the same?
Citi shares traded below $1 in early March but have soared higher than $4.01 a share since. That’s a huge lift for the stock, and so investors will be looking for Citi to justify that show of confidence.
A huge part of this run-up in Citi’s share came after Pandit wrote in an “internal memo” to claiming that the bank was profitable during the first two months of 2009. The memo was obviously intended for public consumption and helped set off the broader rally in financials. If Citi doesn’t live up to the expectations that it has seen some improvement, expect real trouble for the stock.
Citi almost certainly benefitted from the ability to borrow under a government guarantee. Cheap money is manna for banks, so it should be able to show some gains from capital markets activity.
Stop by tomorrow morning, where Joe and I will be covering the results live.