Sunday, January 29, 2012

Citigroup Financial Performance Drops: Revenues, Net Income, & EPS Decrease

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Citigroup Earnings Drop: Revenues, Net Income, & EPS Decrease

Citigroup Summary Q4 2011 Citigroup Q4 financial performance disappointed and reached multi-quarter lows. However, debt and credit value adjustments plus various additional charges and credits create volatility each quarter. Net revenues swing up or down accordingly. This quarter it was down, last quarter it was up. Credit losses have been contained and core banking operations have stabilized. Financial position strengthened via a decrease in total assets therefore the capital ratio improved. Compared to the dismal financial results in 2007, 2008, and 2009, the current Q4 2011 performance is adequate, but still below peers. Annualized return on assets is +0.59%, which is greatly improved, but also below peers.

Citigroup Income Statement Q4 2011 Citigroup financial performance dropped with net revenues of $17.17 billion, net income of $1.17 billion, and earnings per share of $0.38. From the prior quarter Q3 2011, net revenues were down -17.56%, net income was down -69.11%, and earnings per share were down -69.11%. From the prior year Q4 2010, net revenues were down -6.52%, net income was down -11.00%, and earnings per share were down -11.63%. The operating margin was 7.94% and the net income margin was 6.78%. Both margins dropped significantly.

Citigroup Balance Sheet Q4 2011 Citigroup total assets are $1.875 trillion, a decrease of -3.16% QoQ and -2.04% YoY. The decrease in assets improved the capital position. Citigroup last had total assets of greater than $2 trillion in Q1 2010, and just for that quarter. Previously total assets dropped below $2 trillion  in Q3 2008 and have remained below with the exception of Q1 2010. Return on assets was steady at +0.59%, which is low for banking but historically high for Citi. The capital to assets ratio (stockholder's equity to total assets) improved to 9.59%, which is much improved from 2007 and 2008 and a multi-year high. The financial regulatory Tier 1 common ratio is 11.8% and the Tier 1 capital ratio is 13.6%. All the capital ratios are adequate.

Citigroup (C) Rating Q4 2011 At December 31, 2011, we have rated Citigroup a "D-", the same as at September 30, 2011. Financial position is adequate and has slightly strengthened by reduction in total assets and increase in total equity. Financial performance continues adequate but has dropped. Our rating weights financial position more than financial performance and emphasizes safety and soundness, not future earnings potential. Ratings range from A+ down through G-.

Citigroup Financial Performance by the Quarters Citigroup Earnings Per Share Current Earnings per Share of $0.38 is -69.11% QoQ, -11.63% YoY, and an 8-quarter low. A 1-for-10 reverse stock split was effective May 6, 2011. Prior quarters were restated by Citigroup and increased EPS by a factor of ten times. Only recent, restated quarters are included in the chart below. The chart average EPS is $0.91.

Citigroup Net Revenues, Operating Income, and Net Income Consolidated revenues are reported net of interest expense as Net Revenues. Current Net Revenues of $17.17 billion are -17.56% QoQ, -6.52% YoY, and an 8-quarter low. Current Operating Income of $1.36 billion is an 8-quarter low. Current Net Income of $1.17 billion is -69.11% QoQ, -11.00% YoY, and an 8-quarter low. The chart averages for NR, OI, and NI are $18.39 billion, $-2.01 billion, and $-464 million, respectively.


Citigroup Operating Margin and Net Margin Current Operating Margin of 7.94% is a 4-quarter low. Current Net Margin of 6.78% is also a multi-year low. The chart averages for OM and NM are 16.60% and 12.94%, respectively.


Citigroup Capital to Assets, Tier 1 Common, and Tier 1 Capital Ratios The Tier 1 Capital Ratio of 13.60%, Tier 1 Common Ratio of 11.80%, and Capital Ratio of 9.59% are adequate. All are at multi-year highs. The chart averages for T1Capital, T1Common, and Capital Ratios are 12.64%, 9.17%, and 8.49%, respectively.


Citigroup Return on Assets Current Return on Assets of +0.59% is adequate, but well below the banking benchmark of +1.00%. The ROA chart average is -0.13%.


Citigroup Income Statement Components Current NonInterest Expense, operating expenses, of $12.46 billion appears to have stabilized and be contained, but has continued over $12 billion for 5 consecutive quarters and is at the high end of the recent range. Current Net Interest Income of $12.08 billion is an 8-quarter low and trending slightly downwards. Current NonInterest Revenue of $5.09 billion is an 8-quarter low and the primary driver of net income. Current Provision for Credit Losses and for Benefits and Claims of $2.87 billion is an 18-quarter low. The chart averages for NIE, NII, NIR, and PCL are $13.62B, $12.68B, $5.71B, and $6.79B, respectively.


Citigroup Operating Expense Ratio The current Operating Expense Ratio of 56.52% is an 8-quarter high. The chart average OER is 48.84%.


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