For Citigroup, Better-Than-Expected Earnings Won't Be Good Enough



Citigroup is scheduled to announce its Q1 earnings Monday morning.

Wall Street is looking for EPS of $1.00 on revenue of$19.8 billion.

However, a bottom line surprise alone won't cut it this earnings season.

On Friday, JP Morgan and Wells Fargo each beat on the top and bottom lines.  But both underperformed the stock market on Friday as their shares sold off.

With Citi's stock price up 27 percent this year, details will be very important.

"Going into 1Q results, we think C...may be better positioned (given upside from cap mkts, expenses and provision expense)," writes Deutsche Bank's Matt O'Connor.

Credit Suisse's Moshe Orenbuch is also optimistic.  From a note to clients last week: "We expect the large banks to kick off 2012 with respectable 1Q results. We look BAC, C and JPM to benefit from improved trading in 1Q. Commentary around loan growth and demand, in addition to commentary regarding pace of capital deployment will be focal points. We are positively biased to large banks given stocks are seeing at attractive valuations given expectations for improved profitability and greater capital deployment of capital in 2012."

Morgan Stanley's Betsy Graseck is a bit more guarded.  "We are Equal-weight on the risk that a slow-down in emerging markets offsets improvements in US housing," she wrote.

Analysts will also be looking for an update on Citi's plan to resubmit its capital plan to the Federal Reserve.  In case you forgot, Citi is doing this because they recently "failed" the Fed's bank stress test.

Citi is also one of the many banks that Moody's recently put on credit watch.  The ratings agency warned that the Citi's credit rating could be slashed by up to two notches.  A downgrade of this nature could be bad news for Citi's derivatives business, writes Bank of America's Guy Mozkowski. "Though liquidity/ funding impacts appear manageable for firms in our coverage, we expect derivative counterparties will likely remain highly credit sensitive, and may substantially reduce activity with firms at risk of “Baa”-rating, including: C."

All eyes will be on Citi tomorrow morning.

Don't Miss: Bank Of America Presents 18 Companies That Will Beat and 6 Companies That Will Miss Earnings Estimates This Quarter >

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