Citigroup (C – Get Report) has the most sprawling international operations among the largest U.S. banks, with roughly half of total revenue coming from foreign markets in businesses like bond- and stock-trading, currencies, investment-banking and consumer finance.
So the $1.9-trillion-asset bank’s first-quarter earnings report, due out on Monday, could provide investors with a preview of how financial conditions are holding up outside of the U.S.
It’s a gnawing question after a report this week from the International Monetary Fund predicting that global economic growth will slow to 3.3% this year, from 3.6% in 2018.
Led by CEO Michael Corbat, Citigroup is expected to show essentially zero growth in net income from a year earlier, based on a survey of analysts by the data provider FactSet.
Earnings per share likely rose by 7.1% to $1.80 — thanks to the extensive stock buybacks that Citigroup has conducted over the past year to reduce the number of outstanding shares.
Executives use buybacks to juice the stock price in the short term, but analysts including Odeon Capital’s Dick Bove have said that the practice deprives shareholders of longer-term rewards; banks should instead be investing their extra capital in new loans, better technology and other opportunities to assure future profit growth, Bove said.
New York-based Citigroup’s larger and more domestically focused competitor, JPMorgan Chase (JPM – Get Report) , said Friday said net income climbed 5% from a year earlier, and earnings per share increased by 12%.
Yet Ken Leon, a bank analyst for the Wall Street research firm CFRA, said he expects Corbat to set a positive tone during a conference call with analysts following the release of results.
“Corbat likes to set the tone, and he’s going to come out more confident than investors, in terms of the worries about a slowdown outside the U.S.,” Leon said in a phone interview.
The earnings report comes at a crucial time for Corbat, 58, who took over as CEO in 2012 and has worked to strengthen the bank following its $45 billion bailout during the financial crisis a decade ago.
Corbat effectively got a new boss in January, when former U.S. Comptroller of the Currency John Dugan took over as chairman of the bank’s board of directors.
And at a U.S. House of Representatives hearing this week in Washington, Corbat was forced to answer awkward questions regarding his feelings — about the fact that he made $24 million in total compensation in 2018, and that he gets paid, on average, more than 400 times what the average Citigroup employee makes.
He replied that employees could always hope for advancement within the bank.
Later in the week, he sent a memo to employees announcing the retirement of President Jamie Forese, the bank’s No. 2 executive, along with the departure of Francisco Aristeguieta, CEO of the bank’s operations in the Asia Pacific region, for another opportunity.
Paco Ybarra, a trading executive, will take over leadership of the bank’s institutional businesses, while Carey Lathrop and Andy Morton will succeed Ybarra as co-heads of the trading business.
“Change is healthy and creates new opportunities for our firm and our people,” Corbat wrote in the memo.
And if they’re lucky enough, fatter paychecks.
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