Bank of America doubles profits, Citigroup tops estimates

Bank of America tops estimates with profits doubling in Q1. Citigroup beats as company plans to trim consumer business in Asia. Yahoo Finance’s Myles Udland and Brian Sozzi break down the details.

Video transcript

MYLES UDLAND: All right, let's take a look at some earnings that came out this morning, still in the financial sector as we get this earnings period underway. Results both out of Citi and Bank of America crossing the tape earlier this morning. And Brian Sozzi, again, we'll talk about this in the next hour as we dig in a little bit more on the Morning Brief, but both banks coming out and beating on the top and the bottom lines.

And look, you know the game as an analyst. You can't just come out and raise your estimates to some huge number, even if you think the bank's going to beat-- if your justification is, well, everyone else is beating, right. So, the firm, the executive team knows the bogey they need to top, but clearly analysts are just way behind where results are coming in. And I don't know if this is going to rightsize itself as we get out of the financial sector, but boy, is it-- is it a strange period right now. Estimate, you've got to throw them out the window, or you can add 50% to them or something, because these numbers are just off the charts here.

BRIAN SOZZI: Yeah, just going back to my analyst roots, it's hard to measure some of this stuff in periods of very rapid recovery, or on the other side of things, when the economy is falling off a cliff. And clearly, obviously, we're in that recovery phase now where sales are just coming back so fast, you have a lot of high structural costs still in the system because of the COVID-19 pandemic. You have inflation in the cards. You have consumers behaving a lot differently.

But you look at PepsiCo results, all in all, pretty good. It's still suggestive of a company that is benefiting from a lot of the stimulus that is out there in the markets, but then miles on the other hand, Citigroup benefiting from all the retail trading activity we saw in the first quarter. But I will note this, very important to discuss what Citigroup announced this morning, that they're exiting 13 markets, notably China. That is the first major move by New CEO Jane Fraser, and a signal early on to investors that this may not be business as usual on Citigroup. And that business as usual, for the most part, has been the status quo, thinking that they need to operate in every single market.

And Fraser is saying, you know what? I'm going to take a harder line-- no, a harder look at this business, and if I need to, I'm going to cut costs. I'm going to cut costs in a big way and we're going to return that cash to shareholders and invest in more profitable areas of the business.

MYLES UDLAND: And you know, Sozzi, it's interesting, you look at Citi's by business unit as well. Investment banking revenue up 46% in the most recent quarter. So, you see Citi divesting some of its retail operations. Maybe it wants to lean more into some of that trading area, the institutional area.

Everybody wants a piece of Asset Management, of course, these days, but Citi-- I don't know if we want to call it a zig, we could call it a zag-- certainly seems to be moving in a direction that's opposite from, let's say, good old fashioned investment bank, like Goldman Sachs, that is investing more in its consumer facing businesses. And of course, I don't think that Goldman's consumer brand is going to be anywhere near Citi's anytime soon. But just the general direction that each bank is going is interesting to see them sort of maybe moving in somewhat divergent directions at this point in time.

Just something else to call out here from these results that Brian Moynihan, CEO over Bank of America. Not quite as robust in his commentary as Jamie Dimon was yesterday, but he did say that, quote, "we believe that progress in the health crisis and the economy point to an accelerating recovery." So, he's not going with, Sozzi, 2023 recovery.

Not singling out that consumer spending is above where it was back in 2019, 14% increase over 2019, according to JP Morgan. But Bank of America, with that robust credit card, debit card business, certainly can see the signs of the recovery coming. And again, I think the old saw, banking as a levered bet on the economy, and we're kind of seeing that in some of these results.