Chillin' out till it needs to be funded
Citi engaged a lot of market watchers with a quarterly revenue tab of $20.6 bln, a billion more than analyst expectations with the bad bank holdings down to $320 bln odd but still yielding $4 bln in quarterly revenue.
While Citi holdings are down from a near $1 Tln in 2008 to $320 bln, they will continue trending downwards to less than 20-25% value of date one feels. Thus the remaining revenue of $16 bln is even more creditable with Tangible book value trending upwards. Predictably, Citi Fixed income revenue ticked down 30% to $ 3 bln , while Asia and LatAm Retail Consumer Banking revenue ticked up to $4.8 bln growing 15% in Latam, 10% in Asia and now making almost 60% of its RCB portfolio. Domestic Retail fell 9% in North America.
Most of the profits of the bank came from credit costs downtick as more than $2 bln was released from excess loan loss reserves in its $3.3 bln profits even as operating costs rose. Credit casrdp portfolios continued to remain sunny with lower indications of a downpour as 90+ delinquencies came down a big 35% to 1.15% of their card portfolio
The profits of $3.3 bln counted a good $1.06 in EPS an earnings surprise of 14 cents that could not sustain the markets interest though as credit reserves were the only profitable accretion for the company
Citi’s total loan losses provision of $34 bln is 5.4% of the portfolio, way ahead of JPM’s 3.6-3.7% Out of the released credit reserves nearly half belong to the good bank portfolio of Citicorp
The 16.3 bln in revenues come across Securities and Investment Banking at $5.5 bln and Transaction Services (trade finance) at $2.7 bln balancing the retail income of $8.2 bln 20% of the corprorate investment Bank income was Investment banking fee and advisory income at $1.1 bln and Fixed Income still the emeat of the rest at $3 bln leading first reactions of an uptick in Goldman Sachs trading revenue expectations next week
Cap One was the first to report great profits last week, with credit quality improvememnt providing the banks a good ramp on which to start off capital raising discussions with clients but unlikely that that will hold the investors’ interest.