Citigroup will have an opportunity to showcase the progress of its yearslong turnaround efforts when it releases its third-quarter results on Friday. However, this will not be an easy task.
According to analysts surveyed by FactSet, Citigroup’s profit is expected to decline by 28% from the same quarter last year, amounting to $2.5 billion in earnings ($1.23 per share) on revenue of $19.3 billion.
In a recent announcement, chief executive Jane Fraser stated that Citigroup is implementing a streamlined management structure to eliminate unnecessary complexity within the bank. This move comes after years of criticism from regulators regarding weak internal controls and risk management procedures.
Fraser acknowledged the difficulty of these decisions, stating that they may not be universally popular within the bank and will make some employees uncomfortable.
However, the financial improvements resulting from this management overhaul will not be reflected until the fourth quarter, according to Citigroup.
In the meantime, investors will be closely monitoring any signs of progress in the ongoing transformation. Citigroup’s shares currently trade at half of the bank’s tangible book value, making them appear attractively cheap. Nevertheless, cautiousness persists among investors due to the bank’s struggles since the global financial crisis.
While some investors remain skeptical, Wells Fargo analyst Mike Mayo believes that the stock is undervalued and fears are overstated. Mayo also views the recently announced reorganization positively, as he believes it will help reduce internal divisions and promote greater coordination within the firm.
Citigroup is one of several banks reporting their third-quarter results in the coming weeks. JPMorgan Chase and Wells Fargo will also release their results on Friday, followed by Bank of America, Goldman Sachs, and Morgan Stanley early next week.