Saturday, January 26, 2013

Citigroup Earnings Review: Downtrend Reversed!

Citigroup reported QE December 2012 financial results on January 17

Citigroup earnings rebounded from the prior quarter and the prior year. However, current earnings per share of $0.38 is below the 16-quarter average of $0.58. Michael Corbat is now CEO, replacing Vikram Pandit, in this dawn of a new era.

Financial performance is stabilizing and slightly uptrending. Financial position is solid and capital continues strengthening. The problem is risk management has been proven incompetent over the years. Operating expenses and losses continue high historically in relation to gross revenues. Citigroup ($1.86 trillion total assets) is in the Trillion Dollar Assets Club with JPMorgan, Bank of America, and Wells Fargo.

At QE 12-31-12, I have rated Citigroup a "B-" on a scale of A+ to G-. This is an upgrade from "E+" at the prior QE 9-30-12. The median rating is "D" and the average rating at QE 9-30-12 was "C". Financial position is weighted more than financial performance. The QE 9-30-12 bank ratings review is here.

Michael Corbat, Citigroup's Chief Executive Officer, said, "Our bottom line earnings reflect an environment that remains challenging – with businesses working through issues like spread compression and regulatory changes – as well as the costs of putting legacy issues behind us. However, we did make progress on several fronts. At 8.7%, we reached the target for our year-end Basel III Tier 1 Common ratio. We continue to have a very liquid balance sheet and a high-quality credit portfolio in our core businesses. It will take some time to work through the challenges of the current environment but realizing our core earnings potential, as well as improving our returns on assets and tangible equity, are critical goals going forward."


Seeking Alpha