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Market Update

Earnings on Tap: Citigroup

After decades of growth for growth's sake, the bank is finally scaling back and focusing on profitability and value creation.

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 Citigroup (C) is set to reveal first-quarter results Monday ahead of the bell. Wall Street expects earnings to come in at $1.18 per share, up from $0.95 per diluted share reported in the year-ago period.

For the fourth quarter of the previous fiscal year, the bank reported net income of $1.2 billion, or $0.38 per diluted share on revenues of $18.2 billion. Although the results were better than the previous year, the bank missed analyst expectations by a wide gap as legal expenses increased by more than $400 million, or 54%, during the quarter, partly on account of a $305 million charge related to a settlement over foreclosure issues.

CEO Michael Corbat said the bank continues to have a very liquid balance sheet and a high-quality credit portfolio in its core businesses. Corbat, however, noted it would take some time to work through the challenges of the current environment. Recently, Citigroup announced a plan to repurchase $1.2 billion in shares following the 2013 Comprehensive Capital Analysis and Review. The company's $0.01 per share quarterly dividend remained unchanged.

Being recapitalized and refocused under new management, Citigroup seems to be on the way to a successful turnaround. "After decades of growth for growth's sake, the country's third-largest bank is finally scaling back and focusing on profitability and value creation," writes Morningstar analyst Jim Sinegal.

After gaining a robust 13.4% on a year-to-date basis, the stock is presently trading close to Sinegal's fair value estimate.

Gazala Parveen does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.