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Citi's Lights Are Bright Ahead of Earnings

Balancing these objectives is not easy, especially since Citi is highly levered to the global economy. In that regard, attention should be paid to how Citi performs in segments like Global Consumer Banking and transaction services, which disappointed last quarter. The lackluster results led to sluggish net interest income (NII), which was down 1% year over year and down 2% sequentially.

Let's also remember that loans were flat year over year and down 1% sequentially last quarter. This indicated to me that both Wells Fargo and JPMorgan were stealing market share from Citi. This also meant that despite the reasons to rejoice in Citi's strong showing in commercial lending, management is underperforming on the consumer side of the business.

Average retail loans were up only 2% sequentially while card loans were down 1% -- two key areas where Citi needs to focus its attention this quarter. So, how the stock performs on Monday will depend on how well management was able to repair the deficits in consumer lending, among other areas.

I've been bullish on Citi's revival for quite some time now, and I don't see any reasons to change sentiment especially with the housing recovery now in full swing. Although I believe Citi will beat its earnings-per-share estimates due to continued cost cutting and restructuring plans, I would caution about the revenue target. It seems too optimistic given not only the less-than-ideal interest rate environment but also Citi's dependence on Europe, which has yet to fully recover.

At the time of publication, the author held no position in any of the stocks mentioned.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

Richard Saintvilus is a private investor with an information technology and engineering background and the founder and producer of the investor Web site Saint's Sense. He has been investing and trading for over 15 years. He employs conservative strategies in assessing equities and appraising value while minimizing downside risk. His decisions are based in part on management, growth prospects, return on equity and price-to-earnings as well as macroeconomic factors. He is an investor who seeks opportunities whether on the long or short side and believes in changing positions as information changes.
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