NEW YORK (TheStreet) -- Citigroup (C - Get Report) has been the worst performer among the big four U.S. banks in 2014 for lots of good reasons, but unlike peers such as Wells Fargo (WFC - Get Report), JPMorgan Chase (JPM) and Bank of America (BAC), Citigroup might fare surprisingly well in what looks like a sustained low interest rate environment.
Most banks want to see interest rates rise because it will allow them to invest and write new loans at higher yields. The amount they will have to pay on deposits will also increase, but traditionally at a slower rate.
Take Bank of America CFO Bruce Thompson, for example, following the release of first quarter earnings April 16.
"We continue to remain poised to benefit from higher rates, particularly when the short end of the curve moves up," Thompson said.
Thompson's counterpart at JPMorgan Chase, Marianne Lake, made similar comments during her company's first quarter earnings call.
"Deposit margins are relatively flat. At the moment, we've reached the point where volume is providing support to [net interest income] but not strong growth until we start to see rates continue to rise and be able to reinvest up the curve as deposit investments mature," she said.
Wells Fargo sees the "most likely" scenario as a 1% Fed funds rate and a 3.56% 10-year Treasury rate over the next 24 months, according to its latest quarterly filing March 31. If rates stay lower than that, earnings will be lower. If rates move higher Wells Fargo estimates, the bank expects to earn more.
Nearly three months later, however, the Fed funds rate has moved up by just .02% to .1%, and the 10-year Treasury has fallen to 2.66% from 2.72%.
Increasingly, forecasters are predicting interest rates may stay where they are for years. Executives at PIMCO, one of the world's largest bond fund managers, have recently referred to a "new neutral" where the global economy "will be unable to grow and generate inflation at pre-crisis levels for many years to come."
Citigroup sounds like it may be better prepared for such an eventuality than peers. Responding to a question about the bank's preparedness to hit 2015 financial targets it put out in early 2013, CEO Michael Corbat said, "we didn't see nor were we counting on a big uplift in terms of interest rates to be able to achieve our targets and we're going to achieve these targets through a few things."
Those things include "expense discipline" and ongoing efforts to wind down or sell assets in the unit known as Citi Holdings. More important to this discussion, however, is that they do not rely on a rise in interest rates.