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

Core Viewpoint - Citigroup Inc. is expected to report increases in both revenue and earnings for the second quarter of 2025, driven by growth in net interest income and investment banking revenues [1][5]. Financial Performance Expectations - The Zacks Consensus Estimate for second-quarter sales is $20.9 billion, reflecting a 4% year-over-year increase [2]. - The consensus estimate for earnings has been revised down to $1.62, indicating a 6.6% rise from the prior year's quarter [2]. - Citigroup's net interest income is estimated at $14.2 billion, suggesting a 4.9% year-over-year rise [5]. - The average interest-earning assets are projected to be $2.32 trillion, indicating a 2.9% increase from the previous year [6]. Revenue Drivers - Investment banking revenues are expected to increase in the mid-single-digit percentage range due to improved deal-making activities in the latter part of the quarter [8]. - Market revenues are projected to grow in the mid to high-single-digit range year-over-year, with a consensus estimate of $5.4 billion, a 5.5% increase [10]. - Income from principal transactions is estimated at $3.23 billion, suggesting a 13.3% increase from the prior year [11]. Expense Management - Citigroup is focused on reducing expenses through organizational simplification, but increased investments in business transformation and higher volume-related expenses may keep costs elevated [12]. Asset Quality Concerns - The company is expected to increase credit reserves due to anticipated higher interest rates and the impact of tariffs, with non-accrual loans estimated at $3.46 billion, a 53.9% increase from the previous year [13]. Stock Performance and Valuation - Citigroup shares gained 21.6% in the second quarter of 2025, outperforming the industry average of 20.2% [16]. - The stock is currently trading at 10.38X forward 12-month earnings, below the industry average of 14.75X, indicating a potentially attractive valuation [18]. Strategic Initiatives - The company is undergoing a major overhaul to streamline operations and improve profitability, including exiting consumer banking in nine countries and cutting 20,000 jobs, expected to save $2-$2.5 billion annually by 2026 [23][24].