Citigroup Beats, But Systemic And Idiosyncratic Risks Remain Significant For Sentiment

Not all earnings beats are created equal, and in the case of Citigroup's (NYSE:C) third quarter results, the stronger-than-expected net interest income growth is offset at least in part by the company having talked down expectations during the quarter (beating a lowered bar, in other words). What's more, the primary drivers of the beat (rate leverage and credit costs) seem unsustainable at this point in the cycle, and the company's lack of operating leverage is likely to loom larger over sentiment.

I do think that Citi is undervalued, and I think the Street gives the bank (and its stock) too little credit for the transformative actions underway. That said, this turnaround has been long in coming and investors are understandably skeptical that the bank is finally on the right track. Moreover, with weak prospects for near-term operating leverage and growing risks to the macro environment in 2023, I can see why institutional investors aren't rushing to step into what is still a multi-year self-improvement story.

 

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Citigroup Beats, But Systemic And Idiosyncratic Risks Remain Significant For Sentiment