Citigroup Earnings: NII Outperforms While Fees Suffer; Future Regulatory Changes Could Be Impactful

No-moat-rated Citigroup reported earnings that were largely in line with our expectations, with EPS coming in at $1.33 compared with our forecast of $1.34. The full-year revenue outlook was unchanged at $78 billion-$79 billion, and the expense outlook was unchanged at $54 billion. Within revenue, net interest income is outperforming while markets, investment banking, and wealth revenue remain under some pressure. Underneath the surface, management raised its NII outlook by $1 billion, implying weaker fee performance for the year. We view current NII dynamics as “peak of the cycle,” with some of the outperformance on NII likely to go away as the cycle plays out. While we acknowledge some of the cyclical headwinds at play for fees, we view them as more core to the overall business plan, so on net we view the stability in revenue slightly negatively. One strong point remains the bank’s services and TTS revenue, which continue to do well and have been a consistent growth engine.