Citigroup (C) is scheduled to release its first quarter earnings on April 18. It is important to note that the first quarter of 2010 was, by far, the most profitable quarter last year for Citi. In that quarter it earned $4.428 billion.
The first quarter of 2010 was followed by progressively worse quarters as it earned $2.697 billion in the second quarter, $2.168 billion in the third quarter and $1.309 billion in the fourth quarter. This trend of declining quarterly earnings is unacceptable, weighs on the stock price and must end in 2011. Bank earnings should be relatively consistent throughout a year.
Recent appearances and comments by Chairman Richard Parsons and CEO Vikram Pandit suggest that Citi has turned the corner. The forthcoming April 18 report will either reinforce that view and be well accepted by shareholders, or Parsons and Pandit will be confronted by a hostile crowd at Citi’s annual stockholders’ meeting on April 21.
The fact is that it will be difficult for Citi to report earnings above last year’s first quarter and that is why Citi call options are so quiet. Things could change quickly if Citi reports an increase in reported earnings and they then forecast even better results for the rest of 2011. Today, few market participants seem willing to bet on such a favorable scenario unfolding in the next few weeks.
Disclosure: I am long Citigroup.