This is shaping up to be yet another interesting earnings season in the financial services space.

In the first quarter, the tone had been set by an inverted yield curve that echoed fears over a long-awaited economic slowdown, but this time the key topics of discussion for banks are likely to revolve around mixed economic signals and trade tensions, along with a change in direction in monetary policy that few (if any) experts saw coming only a few months ago.

Leading the pack into earnings season is Citigroup (C - Get Report) , scheduled to report its second quarter results on July 15 ahead of the opening bell. Analysts expect that revenues will land at $18.8 billion, a couple percentage points above year-ago levels.

On the earnings side, the consensus EPS of $1.86 would represent a sizable 23-cent improvement over last year, although a lower share count driven by stock repurchases might end up being responsible for the bulk of the increase.

What to Expect

Likely to support revenues is modest growth in asset balances, a story that has been playing out for the past few quarters. Keeping an eye on the North America cards business will probably be a good way to gauge the health of consumer spending in Citigroup's home country, one of the main areas of strength in the banking sector as of late.

The pace of the loan increase may continue to decelerate, however, as macroeconomic uncertainty might encourage the bank to, as CEO Mike Corbat has recently stated, "make adjustments (to the growth strategy) if the company gets the sense economic conditions are changing."

Another important topic of conversation is net interest margin, or NIM. The financial services space did not take the news of expected monetary easing in May very well, and bank stocks have performed slightly below market average since then. Behind the bearishness is a belief that lower interest rates could eat into banks' margins. Significantly, however, Citigroup has been able to competently expand NIM slightly in the past couple of quarters, despite a yield curve inversion that would have ordinarily suggested margin pressure.

Always worth keeping tabs on is credit quality. For a while, Citigroup and its close peers managed to keep delinquency and non-conforming loans in their books to a minimum. But in the first quarter of 2019, as the charts below illustrate, Citi's metrics took a turn for the worse, with NCL in global consumer banking rising at the highest pace of the past eight periods at least. Gauging whether first quarter numbers represented a fluke or the beginning of an unwelcome trend should be front and center in the minds of investors.

Citigroup's key credit metrics took a turn for the worse in the first quarter. Source: company's earnings slides.
Citigroup's key credit metrics took a turn for the worse in the first quarter. Source: company's earnings slides.

Is the Stock a Buy Ahead of Earnings?

As usual, paying close attention to Citigroup's results will be useful in assessing the overall state of the financial services sector as earnings season kicks off. But in what pertains to an investment opportunity, I continue to find Citigroup's stock a fairly risky proposition, despite it trading at the deepest earnings multiple discount among mega U.S.-based banks.

Worries over macroeconomic deterioration that come and go at the whim of trade and monetary policy events lead me to believe that this is a good time to play safe. To that effect, a more solid and diversified banking name such as JPMorgan (JPM - Get Report) , or even an institutional client-heavy player like Goldman Sachs  (GS - Get Report) , might make more sense, given the uncertainties.

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The author has no positions in any stocks mentioned in this article.