The Banking and Strategy Initiative

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Bank Results Season: Citi unfortunately makes it 3/3 on underperforming Big 4

English: Citi Bank Central America-Headquarter...

English: Citi Bank Central America-Headquarters San Salvador (Photo credit: Wikipedia)

Of course that is just making the coming bank rally sweeter and likely Friday’s Morgan Stanley results which we do not cover anymore will be missed by the rally after Goldman Sachs headlines and most of Signature Bank, Comerica, USB and others go by before them. Citi runs the analyst meet into pree afternoon trades at 11 a.m. as it did score an almost 7X jump in annual earnings to $3.2 Bln but went under the $3.6 Bln expected by the markets. DVA was almost minimal at all banks reporting this quarter and Revenues were a bright $18 Bln with credit losses at Citi still a larg-ish $2.4 Bln but down 40% over the year ago September

Citi ‘s Tangible Book Value has almost doubled in the crisis period with the stable ops gaining ahead of the bad bank loan books dwindled down to a $650 mln Loan loss release. Basel III Tier I is also a bit better than peers because of global diversified operations and Citi Holdings is only 6% of operations (release)

The difference in profits from the year ago quarter is in fact  an exact block from the MSSB loss booked by an impromptu sale as Michael Corbat completes more than a year

Securities and Banking (Trading) revenue was down 10% but saved by DVA add backs to a 2% deficit on year and Transaction Services were flat which is actually an achievement given the bad conditions in global trade

Global Consumer Banking continues to recede in North America revenues to a 7% deficit overall.

Citi managed to showcase the challenges on operating expenses with under $12 Bln on expenses and Op Profits improved to $4.6 Bln EPS still falling 6 cents instead of 2 cents and the difference still explained by its larger block of loan loss reserve releases with loan loss reserves still at 3.2% of portfolio. Tax hit increased from 1.16 Bln to 1.38 Bln

Consumer Banking, evenly split between North America and International Emerging Markets is now 54% of Revenues as the bank. Card Revenues are now 67% of NA operations in Topline contribution as Margins on loans slipped badly by 41 bp presumably on the ‘legacy’ portfolio and 90DPD+ (overdue) have started increasing in North and Latin America

Trading revenues are down 18% on June quarter and looks especially ugly on Investment Banking and Advisory revenues where it seems to be losing market share t leaders with JP Morgan and trading wise losses on topline managaed to still keep it ahead of the Park Avenue Trading rooms of its peer

Even as Investment Banking and Trading Profits halved to $1.2 Bln from $2 Bln reduced expenses gave the profits a 4% fillip

Erstwhile Competitor and now Fund Management specialist(Wealth) Morgan Stanley had exited the Investment Banking business earlier after large trading speculative bets under a certain Philip Gorman. Citi’s  Q3 woes are rather than its $3.2 Bln profit , exemplified by deteriorating Cost Income Ratio with yields under pressure and another bout of asset expansion with just 5% in loan book increases as RoTA fell to 0.69% and Efficiency (Cost/Income) 65% a far cry from the barely manageable just under 60% in the second quarter. More settlement costs could kill the banks cost alignment efforts worse than most banks. RoE for the Bank is a low 6.6%

CIB business including Securities and Banking still commands $ 8 Bln revenues at Citicorp and its probably time for Corbat to lend a hand to its global growth than PR as the bank closes out on announced 11k cuts from December and manages to get the modified Capital plan approval for Dividends and Buybacks translated into Citi(US:C) performing to 42% in the ttm (BAC 57%) and 25% in the year to date compared to 20% for JP Morgan and 23%  for Bank of America




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This entry was posted on October 15, 2013 by in housing, Retail Lifestyle, US and tagged , , , , , , , .


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