The Banking and Strategy Initiative

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Bank Earnings Season 2014: Citi shows up with $3.85 Bln in Net Income in Q4 to legal charges for the quarter

The earnings management exercise is surely showing better “control’ during Mike Corbat’s reign as the bank digests exits from 16 Emerging markets and manages with another 2 cents on the Dollar in earnings in Q4 to pay off $3.5 Bln in legal charges. The earnings cast starts at 11 AM ET

In line with our praises of the bank earlier this year, the bank posted higher Net Interest Margins, the only one among US based banks with a working International presence., playing to its advantage. Citi Holdings assets and Defered tax assets are also available aplenty to Citi management to make earnings management atruly delectable experience for another 7-8 quarters as the North America market, constituting half their global business is still in the doldrums. the NIMs at the bank are closer on to 3% this year at 2.93% and will likely be expected to surge in 2015 as long term yields drop to their lowest ever on the Dollar traded treasuries (10 year) and the shorter end interest rates settle at 0.75% (2 year) CFO, JOhn Gerspach however guided the NIMs to a flat 2.9% in 2015 ( as per 2014 full year margins)

The revenues for Q4 2014 are ‘exactement’ the same Mon dieu, as in 2013 December. Full year net income at $7.3 Bln is a good margin on annual revenues of $77 Bln. We willd etial their outlook after the BofA call and the management speak in the 11 AM call later in the afternoon

The bank has executed agreements for sale of businesses in Japan and Peru over the earlier 11 sales completed and is posting double digit growth of 11% and 17% in checking and deposits in NA business. Branches in US will be concentrated around Boston, New York, LA, Washington DC and Frisco going forward. The Home builder menace in mexico is under control and Operating expenses are flat on year including FX translation.

Outside EMEA, equities grew 24% on year. The bank is also managing paying an increasing tax rate in Q4 using the DTA and Holdings assets as outlined earlier also playing comfortably with higher loan loss releases

Full year comp ratio is also flat at Citi like other biggies at 29% (lowest in the Big 4, GS reports tomorrow)

Outlook for 2015 looks at another stab at improving efficiency to 55 (Income/Expense) with Citicorp revenues flat on year

In our opinion the bank looks  the most comfortable of the four full year reports on Monday and Tuesday and is by far the biggest bank buy ( if not the only) in 2015.


This entry was posted on January 15, 2015 by in Uncategorized.


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