Citi Results No Reason To Rally, Say Cashtaggers

Citigroup, $C, finally gave bullish investors something to cheer at the start of trading Monday. But investors on cautioned that the celebration should be muted given how Citigroup delivered positive results.

The too-big-to-fail bank reported first quarter 2014 sales and earnings before the open that beat consensus estimates, making it the most discussed stock on Monday morning. Shares climbed 4% shortly after the open.

But most investors on remained bearish on Citi. Cashtaggers argued Citi inflated earnings by releasing hundreds of millions from loan loss reserves meant to guard against defaults. As a result, it didn’t really show that business had outperformed Wall Street’s expectations, they said. Sentiment on the stock was 55% bearish right after the open.

Citi’s core business was terrible this quarter (net income down 8%), but it “beat” by pulling from the loss reserves cookie jar. Again. $C

— Joshua Brown (@reformedbroker) Apr. 14 at 08:42 AM

@howardlindzon @reformedbroker so market ramps up on perceived earnings beat that wasn't. atleast rev beat.

— 6killer (@6killer) Apr. 14 at 08:55 AM

Citigroup reported $1.30 EPS, excluding adjustments for the risk of default on credits and debts, on $20.1 billion in revenues. That beat consensus estimates of $1.16 EPS on $19.38 billion in sales, according to estimates compiled by the Analyst Ratings Network.

It released $673 million from its loan loss reserves after net credit losses declined 15% from the prior quarter to $2.4 billion. The company said asset quality continued to improve. Non-accrual assets fell 19%, year-over-year, to $9 billion. Corporate non-accrual loans—business loans that are not generating the stated interest due to nonpayment—dropped 35% to $1.6 billion. Consumer non-accrual loans declined 14% to $7 billion.

Overall, revenues declined from the same period a year ago. The $20.1 billion figure was 1% lower than in the first quarter of 2013. Citigroup attributed the decline to the fixed income markets segment of its business and lower U.S. mortgage refinancing activity in North America.

Despite majority negative sentiment, many investors did see encouraging news in the release. They pointed out that, aside from the headline numbers, facets of the business outperformed analyst expectations.

$C Costs & provisions also beat estm, very encouraging. FICC rev were higher than ML forecast & seque better vs $JPM 's number on Friday

— Kinji Watanabe (@Kinji) Apr. 14 at 08:52 AM

However, most cashtaggers said the market was foolish to rally on Citigroup’s report. The ETFs that track the S&P 500, $SPY, Dow, $DIA, and Nasdaq, $QQQ, all rose in early trading.

somehow $C will save the world from an Eco-slowdown and Russian incursion…not! Stay true my thirsty friends $UVXY $TVIX $TZA

— DannyB (@AnalystOnTheEdge) Apr. 14 at 08:39 AM

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