The Banking and Strategy Initiative

Chillin' out till it needs to be funded

Citi adds the promised dash of real sauce after a penalty loss in 2014: Bank Earnings Season 1Q2015

We could no longer stay on without sharing our peek-a-boo into Corbat’s mind. As promised by Citi last year Toplines have tremored and shaken off Gross Interest revenue on cue in the new year, NII still down 250 odd million. Likely though, its just the bad debt wagon sales being factored in because the 2014 clean up is looking swell on the bank and as we said end of 14, they are probably the team to beat in annual returns this year.

BofA which we neglect from here for some quarters from here has posted the comeback quarter on cue keeping the profit numbers from the books in 2014 without the penalties and getting their EPS but business for both the retail majors is pretty much flailing in the USA.

US Bank reports 76 cents per share in Q1 again and they reported with BofA in a sign of new found love that the Industry watchers should  pay more attention to as well.

Their RoA outperformance still does not reflect that the PE investors returning to real estate have disappeared even as new Housing activity has picked up in the Economy. US Bank has added $2 Bln in Commercial RE assets.

In the overall Economy mortgages are booming, hopefully getting the pipe into shape after the tremendous burst of activity that has thence stayed incomplete in the flurry of regulator inflicted pain as US trundles painlessly through the volatile transfer to higher interest rate regimes if the rates ever move up.

Citi’s Fee based income has a jump from Principal Transactions again to match Q2 and Q3 income of last year if not the higher Q1 levels after the dip in Q4. That means the topline in  Q1 is $19.75 Bln and Loan losses have halved as per guidance to just 200 million. The DTA(Defered Tax Assets) screen  is also not very effective as in 2014 as the Tax Bill at $2 Billion blunts the edge and Net Income is under $5 Bln a billion short of Wells Fargo and JP Morgan at $4.8 bln though with better efficiency at 55% without any penalties to speak of, up 22% from Q1 last year without the pain in Mexico and most LatAm jurisdictions they buoyed out to sea.

As the jump in earnings shows, there is a lot in Citi that was being missed in the bigger story of the Sub Prime Crisis and the bank is showing signs of coming out of a cocoon to speak of. On the bad part, like at BofA, the domestic US business is hurting and Consumer Banking worldwide is flat in earnings and losing 3% in Branch operations and 5% in Cards businesses, albeit on 400 branches lesser. In Corporate Investment Banking, business is flat but the return of $2 Bln in principal transactions brings it back to Q1 levels and efficiency is actually improving to 51% with a not so measly $1.25 Trillion in assets

The earnings conference is about two and a half hours after this report but we do not expect any new revelations to result in updates on the report from there.

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This entry was posted on April 16, 2015 by in Uncategorized.

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