Frank Curzio
Founder & CEO of Curzio Research, Wall Street Unplugged Host
Citigroup's Q1 shows the trading side of bank income statements is running hot, which bears had not priced in. Equities trading revenue was $2.08B against a $1.73B estimate, and Citi is not historically the strongest desk, which bodes well for Goldman Sachs and Morgan Stanley. Every tariff scare, Fed headline and geopolitical shock fed trading flow. Credit quality and loan loss reserves remain real concerns, but banks beaten up on macro fear are running stronger underneath. x.com x.comÂ
Bank stocks look buyable if systematic selling is reacting to a flatter yield curve: the front end that drives earnings has barely moved. JPMorgan and Citi card spending rose 10% and 13%, and Citi and Wells Fargo reported lower credit losses. Wells expects steady margins and improving interest income as loans grow and old fixed-rate assets roll into higher yields. Funds crowded into banks before results, limiting near-term buyers. x.comÂ
Banks' weak response to earnings despite low expectations warrants caution into the rest of Q3 reporting. JPMorgan, Wells Fargo, Citigroup and Goldman Sachs all fell after mixed results, while the bank ETF also declined. x.comÂ
Citigroup's rally looks overdone. It is not a super-premium franchise, yet the stock has tripled since 2023. CEO Jane Fraser's plan is working and the shares were far cheaper than other money-center banks for the past decade, as @RAMCOCAPITAL notes, but the market seems to be making the wrong call on whether Citi is a credit card issuer or an investment bank and broker, though that view could be mistaken. x.com x.comÂ
Goldman's sharply higher equities-trading revenue and longer-run stock gains make the current drawdown tolerable. The division's net revenue rose 72% to $6.44 billion and drove 77% of Goldman's year-over-year net revenue increase. Despite ugly recent price action, the stock is up 18% over one year and 203% over three years. x.comÂ
Citigroup stands out in a lagging bank sector as the only major bank in an uptrend, the only one within 5% of its 52-week high, and the one with the lowest PEG ratio among the majors. An inverse head-and-shoulders continuation pattern is in play with a $165 target. x.comÂ
Citigroup leans bearish despite a record Q2 beat because it guided to a weaker second half, with expenses set to outgrow revenue. EPS beat by about 16% on record equities trading, but the stock cannot hold its 50-day EMA and has formed a bearish flag after the post-earnings flush. Holding 131.40 would stall the move; losing it would break the flag toward 129.17, 127.08 and 123.24. x.comÂ
The big six US banks should report great Q2 results as the front line of a solid economy. Net interest income, fee growth, steady credit trends and capital levels all look supportive, and valuations remain cheap, leaving opportunities to add. x.comÂ
Goldman Sachs' compressed valuation and tempered expectations improve its risk/reward. After a 20%-plus sell-off, its forward P/E is in the low-to-mid 12s, and management has cooled expectations for FICC and expenses. A positive earnings reaction Tuesday has room if equities deliver, the backlog stays healthy, or expenses are better than feared. x.comÂ
JPMorgan is buyable on pullbacks to its daily 9-period moving average ahead of an earnings run-up in early July, with financials such as Goldman Sachs, Citigroup, Interactive Brokers and Bank of America doing great. x.comÂ
Cboe Global Markets is the primary winner of the long-term boom in options trading, owning a toll booth that takes a cut of every trade. Once its platform is built, each extra transaction costs almost nothing, giving exceptional margins, and exclusive rights to products like the VIX and S&P 500 options can't be copied. More traders deepen liquidity in a network effect. It also tends to do well when markets panic, making it a good portfolio hedge. CME Group and Nasdaq are strong competitors. … Show more
