With the level of Fed paranoia steadily rising on Wall Street, investors holding financial stocks are hoping Thursday's earnings report from Citigroup ( C) will remind bears how well a bank can perform with or without a macroeconomic tailwind.

But Sandy Weill's behemoth is so big and its portfolio of businesses so diverse, it's possible a strong quarter at Citi won't be the panacea the broader sector has been craving.

Lately, bank stocks have been reeling as investors fear a reckoning is nearing after three years of easy monetary policy. Those fears were fanned again Wednesday with news from the Labor Department that consumer prices rose more than expected in March.

Not even a spate of good earnings reports from the likes of Bank of America ( BAC), State Street ( STT), SunTrust ( STI) and Commerce Bank ( CBH) has been able to stop the selling. The Philadelphia KBW Bank Index is down 3% since April 2, when the government reported a better-than-expected March jobs report.

While some bank shares still represent value , the larger sector is in trouble. Can Citigroup give the sector a jolt when it reports first-quarter earnings before the bell Thursday?

From a numbers perspective, the world's largest financial services firm probably won't disappoint. Bank analysts, according to Thomson First Call, expect Citigroup to earn 94 cents a share in the quarter, a 19% increase over the year-ago period.

But many on Wall Street say they wouldn't be surprised if Citigroup posts sharply higher quarterly profits than the $4.8 billion most are expecting. A year ago, the bank earned $4.1 billion.

Analysts at Fox-Pitt Kelton, which specializes in financial services firms, say Citigroup is one of a few banks that could post an upside earnings surprise. Overall, Fox-Pitt Kelton is bearish on bank stocks, expecting one-third of those it covers to miss earnings expectations because of a combination of weak commercial loan growth, slow fee growth and falling mortgage income.

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