The Banking and Strategy Initiative

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Bank Earnings Season Q2 2014: Citi posts a $1.24 Earnings ex penalties, Holder making the latest latest wrinkle for the bankers (US:C)

The US Attorneys office caused a new hole where he wanted , another MBS settlement costing a big bank $7 Bln, with Citi making the choice of a quick $3.9 Bln expense off in the current quarter itself. The DOJ penalties, a lion’s share accepted by Citi probably among reasons for a comparatively easier settlement, is not tax deductible for the banks.

Citi posted a topline of $19.3 Bln and a $3.7 bln or $1.21 per share charge for the settlement with DOJ worth $4.5 Bln cash penalties and only a small $2.5 Bln in consumer support back for hurt mortgage customers foreclosed

New Fees and Commissions in the surviving institutional business were above $1 Bln for the quarter while RE lending including mortgages ( another opaque classification including both RE developers and cons mortgages) was more than 50% in retail and fees income in consumer businesses were $2 Bln. NII was stable at $7.2 bln in retail(Global Consumer Banking)

Tier I common of 10.6% and generated capital in the quarter despite new provisions for the settlement as it posted a minimal Net Income paying off $1.8 Bln to Tax in the same quarter after a good run with defered tax assets. Korea continued to be a drag on Asia profits even as NA credit reserves nurse the region’s balance sheets back to health. The Tax bill utilises a further $1.1 Bln in defered tax assets as it keeps some in reserves while ot expecting any more large penalties or settlements to contribute to any negative bottom lines

The legal and Redressal costs are getting expensed mostly from the active Citicorp portfolio while Citholdings is posting increasing revenues having expensed off all credit losses not sold but Net Credit Losses seem to be rising back vertically to nearly 2% from 1.74%. Credit Losses improvements in NA portfolios ( delinquencies improved 10 bp) are balanced out and more by continuing deterioration in Latin America. One still presumes The same only refers to a limited amount from the Banamex portfolio, disposed off in Mexico. Meanwhile analysts and investors nodded to a 26% reduction in retail banking revenues in North America this quarter

A 10% reduction in branches contributed to another 3% improvement in Operating costs, obviating the higher trading job losses in other Wall Street biggies while likely rehiring on IB desks globally

The Earnings before taxes were $ 6 Bln before the DOJ penalties and the Cost income efficiencies have crawled back to a respectable 54% in the Global Banking Model without the pressures at home or in Korea. More than 45 support sites being shut down count to the bigger improvement in Opex planned in 2014. EOP Loans end at a period high as Average Loans improved 8% to $111 Bln and Average deposits improved 3% to $164 Bln

Investment Banking revenues are up 25% and more to $1.33 Bln making it a Top 5 score in Advisory revenues though trading revenues in both Fixed Income and Equities were down 12% and 25% in a volatile quarter where JP Morgan saw 22 trading days in losses in the last 100

The institutional Business is expected to get back to efficiencies only in end 2015

Surprisingly despite continued dings from the Fed on its Capital reporting the bank reports some over optimistic performance ratios including the Net Interest Margin on Average loans which then jumps near 13% levels, Net Credit losses also not making sense at 4%(both in GCB)

Net Credit losses beat income by 2.78 to 2.39 in North America making credit expenses more than half its ‘gross’ top line. Principal Transactions from sales on own account make the highest share similarly in the Institutional business for more times than is likely to be excused by stronger investors even as the banks continue their trudge back from below par levels in 2013 and finally rid off the mortgage blues to more extent than likely to further hurt business performance

Debt underwriting reported $748 mln of the $1.3 Bln in Investment Bank advisory revenues



This entry was posted on July 14, 2014 by in Uncategorized.


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