Here's How to Play Citigroup Ahead of Its Q2 Earnings Release

Citigroup Inc. C is slated to report second-quarter 2025 results on July 15, 2025, before market open. In the first quarter, Citigroup witnessed increases in net interest income (NII) and non-interest revenues. The company also registered a solid increase in Investment Banking (IB) revenues.This globally diversified financial services holding company is expected to register bottom and top-line increases in the to-be-reported quarter.The Zacks Consensus Estimate for second-quarter sales is pegged at $20.9 billion, indicating a 4% year-over-year increase.The consensus estimate for earnings for the to-be-reported quarter has been revised downward to $1.62 over the past seven days. The figure indicates a 6.6% rise from the prior-year quarter’s actual.Estimate Revision Trend Image Source: Zacks Investment Research The company also has an impressive earnings surprise history. Its earnings outpaced the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 8.75%.Earnings Surprise History Image Source: Zacks Investment Research Factors to Influence Citigroup’s Q2 ResultsNII: In the second quarter, the Federal Reserve kept interest rates unchanged at 4.25-4.5%. This is likely to have offered some support to Citigroup’s NII as the funding/deposit costs stabilized.The Zacks Consensus Estimate for NII is pinned at $14.2 billion, suggesting a 4.9% year-over-year rise.Loans: Despite an uncertain macroeconomic backdrop because of Trump’s tariff plans, the overall lending activity was impressive. Per the Fed’s latest data, the demand for commercial, and industrial and consumer loans was solid in the first two months of the quarter.Hence, C is expected to have witnessed a decent rise in loan demand, thereby improving the average interest-earning asset balance. Similarly, JPMorgan and Wells Fargo are likely to have recorded improvements in loan demand.The Zacks Consensus Estimate for Citigroup's average interest-earning assets is pegged at $2.32 trillion, indicating a 2.9% increase from the year-ago quarter’s reported figure.Fee Income: Global mergers and acquisitions in the second quarter of 2025 were impressive than previously expected. Following the Trump announcement of sweeping tariffs, markets plunged in early April, rattling business confidence.However, as trade demands eased and policy direction became clearer, deal-making activities resumed in the last month of the quarter. This is likely to have offered some support to C’s IB revenues in the quarter to be reported. Management expects IB revenues to increase in a mid-single-digit percentage in the second quarter of 2025.Nonetheless, the second quarter saw decent client activities with high volatility in equity markets and other asset classes, including commodities, bonds and foreign exchange. Therefore, Citigroup’s market-making revenues are likely to have witnessed a rise in the quarter to be reported.Citigroup projects markets revenues to grow in the mid to high-single-digit range on a year-over-year basis in the second quarter of 2025. The Zacks Consensus Estimate for markets revenues is pegged at $5.4 billion, which suggests a 5.5% increase on a year-over-year basis.The Zacks Consensus Estimate for income from commissions and fees is pegged at $2.57 billion, which indicates a 3.5% decline on a year-over-year basis.The Zacks Consensus Estimate for income from principal transactions is pegged at $3.23 billion, which suggests a 13.3% increase from the prior-year quarter’s actual.The Zacks Consensus Estimate for administration and other fiduciary fees is pegged at $1.09 billion, which implies a year-over-year rise of 4.9%.The Zacks Consensus Estimate for total non-interest income for the second quarter of 2025 is pegged at $6.81 billion, which suggests a 2.5% rise from the prior-year quarter’s actual.Expenses: Though Citigroup is focused on lowering expenses through organizational simplification, cost reductions and productivity savings, the bank’s increased investments in business transformation efforts, technological advancements and higher volume-related expenses are likely to keep the expense base elevated in the second quarter of 2025.Asset Quality: The company is likely to have set aside a huge amount of money for potential delinquent loans, given the expectations of higher for longer interest rates, and the impacts of Trump’s tariffs on inflation. Citigroup expects a higher credit reserve build in the second quarter of 2025.The Zacks Consensus Estimate for non-accrual loans is pegged at $3.46 billion, indicating a jump of 53.9% from the prior year’s reported figure.What Our Model Unveils for COur proven model does not predict an earnings beat for Citigroup this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. This is not the case here, as you can see below.Citigroup has an Earnings ESP of -1.31%. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.The company carries a Zacks Rank #3 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.Citigroup’s Price Performance & ValuationIn the second quarter of 2025, C shares gained 21.6% compared with the industry’s rise of 20.2%. Shares of its peers, JPMorgan JPM and Wells Fargo WFC grew 19.8% and 13%, respectively, in the same period. Price Performance Image Source: Zacks Investment Research JPMorgan and Wells Fargo are also scheduled to announce quarterly numbers on July 15. Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.Now, let us look at the value Citigroup offers investors at current levels.Currently, C is trading at 10.38X forward 12-month earnings, below the industry’s forward price/earnings (P/E) multiple of 14.75X. The company’s valuation looks inexpensive compared with the industry average.Price-to-Earnings F12M Image Source: Zacks Investment Research Citigroup’s stock is also trading at a discount compared with JPMorgan's P/E of 15.06X and Wells Fargo's P/E of 13.08X.Evaluating Citigroup Stock Ahead of Q2 EarningsC is undergoing a major overhaul to streamline operations, focus on core markets and improve profitability. It has exited the consumer banking business in nine countries and is progressing to wind down operations in Korea and Russia.  Simultaneously, Citigroup is cutting costs through a two-year plan to eliminate 20,000 jobs, announced in January 2024. This is expected to generate $2-$2.5 billion in annual savings by 2026. Coupled with a shift toward higher-margin, fee-based businesses, the bank is targeting 4-5% annual revenue growth through 2026.Citigroup also rewards shareholders handsomely. After clearing the 2025 Fed stress test, the company plans to hike its quarterly dividend 7.1% to 60 cents per share. It has a share repurchase plan in place. It also commenced a $20-billion share repurchase program in January 2025, with $1.75 billion worth of stock repurchased in the first quarter and a similar buyback target for the second quarter. These measures signal confidence in the company’s long-term strategy and financial position.Though its restructuring strategy is encouraging, it carries execution risk and near-term uncertainty because of tariffs and interest rate fluctuations. Also, as the interest rates are less likely to come down substantially in the near term, it is expected to hurt borrowers’ credit profiles. Hence, C’s asset quality is likely to remain weak.Hence, investors should not rush to buy the stock now. To get clarity and possibly an appealing entry point, those interested in adding it to their portfolios may be better off waiting until after the quarterly results are out. Also, potential investors should keep an eye on macroeconomic factors that are likely to influence the company’s performance. 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(C): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks