Chillin' out till it needs to be funded
Well, Vikram Pandit’s Citi is finally in business. When they finished 2009, Cit had put almost $900 billion in assets ‘to be disposed’ in Citi Holdings of which only $550 bn was in existence on December 31. $175 B in Mortgages from $350 B in Local and Consumer Lending while the income from CVA ( carried off derivatives positions) of $2 billion in 1Q2008 wiped off.
When 2010 Q1 results came online, the Balance sheet was painted green $4.4 Billion in one Quarter, revenues back to a respectable $25 Biillion of which $18.4 billion has come from Continuing operations or Citicorp across Regional Consumer Banking, Securities and Banking as well as Transaction Services. Securities and Banking revenue had all but disappeared to $3.3 bB in the last quarter of 2009 and Citi uses that as a basis to show the $5.8 billion increase in sequential profits which would then presumably be from all of the Fixed Income Trading of $5 billion and $1 billion form Equitieswhich had disappeared in the December Quarter. But seriously, they hare not really gunning for Investment Banking right now or for trading. In Investment Banking Equities underwriting has further dropped by more than half with Morgan Stanley Smith Barney safely in the Citi Hodings part. Go Figure.
in Retail Banking and synergistically with Transaction services counting the millions of Institutional Client Group accountw with tied payroll accounts ad more, Emerging markets already constituted 46% of Citi Income in 2009 and more is expected to go there, with Vikram PAndit and Citi touting their new Metro GDP model to push for limited urban growth in the BRIC Economies and other emerging market marrying cost control ( and maybe even the RBI limitation on Foreign Bank branches) to a new strategic high. LatAm and Asia contributed $2 illion and $1.8 billion respectively from 2200 and 700 branches respectively, with Transaction services marrying another $2.4 billion to the Topline. North America remains the highest contributer with 48% of the Segment Income at $3.8 B
Operating Expenses have dropped almost 8% for the bank, with Loan Loss reserves a high but ‘manageable’ 6% overall and almost 8% in Retail Consumer Banking Net Credit Losses were down $2 b mostly because of the introduction of the manageable basis, Credit Costs remaining at $8.4 billion with marginal improvements in the real estate scenario in North America and Rest of the World.
Interestingly the almost ‘funky’ improvement in Net Interest Margins from 2.6% to 3.3% on a $2 Trillion balance sheet has been entirely attributed to repayment of TARP in the 4th Quarter and the freeing of cash. More than $860b in Deposits only 33% international managed to contribute to this gain despite a spread squeeze in Asia
Citigroup’s net interest margin was 3.32%, up from 2.65% in the fourth quarter of 2009, mainly due to the
adoption of SFAS 166/167. Net interest margin expansion was also driven by the absence of interest
payments on TARP trust preferred securities repaid in the prior quarter and the deployment of cash into
higher yielding investments.
Branded Cards portfolio continued to contribute a massive $2.4 billion to credit losses, and $4 bn and more in past due. Net Credit Losses on the Card portfolio were over 10.5% overall. REtail Banking carried Average Deposits of $289 B and Average loans of $108 B and another $112 B in Credit Cards. Retail yield is 9.49% and Cards yield more than 14.5%. RCB yielded $1 B in profits on $8B in revenues.
Overall Citicorp revenues of $18B are equally split between Interest($9.8B) and Non Interest Income($8.6B) and Credit Reserves release of $360 M. Tier I Capital Ratio and Common Ratio are pretty impressive at 12% and 9% respectively.