C - Citibank

[dcollon]

Citi issues statement on 2014 CCAR results

Wednesday, March 26, 2014 08:22:52 PM (GMT)

 

•As previously disclosed, The Fed announced that it objected to the capital plan submitted by Citi as part of the 2014 Comprehensive Capital Analysis and Review (CCAR). ◦ The capital actions requested by Citi included a $6.4B common stock repurchase program through Q1 of 2015 and an increase of Citi’s quarterly common stock dividend to $0.05.

 

•Citi will be permitted to continue with its current capital actions through Q1 of 2015. ◦These include a $1.2B common stock repurchase program and a common stock dividend of $0.01 per share per quarter.

 

•These actions are subject to approval by Citi’s board in the normal course.

•Management notes: “We will continue to work closely with the Fed to better understand their concerns so that we can bring our capital planning process in line with their expectations and meet their standards on a qualitative basis as well. We have not yet made a decision as to when we will resubmit our plan."

 

[constructive]

http://www.bloomberg.com/news/2014-03-26/citigroup-fails-fed-stress-test-as-goldman-bofa-modify-plans.html

 

Interested in seeing what they asked for?

 

http://finance.yahoo.com/news/citi-statement-2014-ccar-results-202000485.html

 

The capital actions requested by Citi included a $6.4 billion common stock repurchase program through the first quarter of 2015 and an increase of Citi’s quarterly common stock dividend to $0.05.

...

We have not yet made a decision as to when we will resubmit our plan.

[alertmeipp]

Ouch,  thought this were a slam dunk. Wonder how will let go this time.

[rpadebet]

Ouch,  thought this were a slam dunk. Wonder how will let go this time.

 

JPM just said they got approved for 6.5 bill buyback. BAC seems like 4 bill. So maybe Citi would have got approved too if they were closer to 4 bill.

 

EDIT:

On second thought, BAC approved for 4 bill buy back and 2 bill dividend so around 6 bill total capital return approved. This is broadly similar to what JPM got approved for and Citi got rejected for. So like they said, this is mostly qualitative reasons for rejection. Resubmitting for a lower amount without any new controls in place for the global businesses loss projections might not help a lot. I think they can get approved for the 6 bill they asked if they have all their risk controls up to the standards of other banks (which is think is a much more difficult ask for Citi) 

[racemize]

Ouch,  thought this were a slam dunk. Wonder how will let go this time.

 

JPM just said they got approved for 6.5 bill buyback. BAC seems like 4 bill. So maybe Citi would have got approved too if they were closer to 4 bill.

 

EDIT:

On second thought, BAC approved for 4 bill buy back and 2 bill dividend so around 6 bill total capital return approved. This is broadly similar to what JPM got approved for and Citi got rejected for. So like they said, this is mostly qualitative reasons for rejection. Resubmitting for a lower amount without any new controls in place for the global businesses loss projections might not help a lot. I think they can get approved for the 6 bill they asked if they have all their risk controls up to the standards of other banks (which is think is a much more difficult ask for Citi)

 

I agree, given the BAC approval and that Citi had higher levels, I expect this is almost entirely qualitative.  Hopefully, they can get their ducks in order for getting something through in the next month.

[rpadebet]

  Hopefully, they can get their ducks in order for getting something through in the next month.

 

That't the part I feel most uncomfortable with. I don't think this is such a short term thing. It might take years for Citi to get their risk controls at par with other banks.

 

Their history suggests they have a poorly integrated business after all the acquisitions. That is one of the reasons they have gotten into so much trouble in every crisis. It might not be so easy to fix all that in the short term.

 

Fed is supposedly telling them they are too big to manage..

[alertmeipp]

It is such an irony, citi gets its revenue from around the globe which u can argue is safer than if most of revenue is coming from one region.

 

I don't think they have to adjust the issues right off the bat but they need to plan on them, would mean higher cost.

[Guest wellmont]

  Hopefully, they can get their ducks in order for getting something through in the next month.

 

That't the part I feel most uncomfortable with. I don't think this is such a short term thing. It might take years for Citi to get their risk controls at par with other banks.

 

Their history suggests they have a poorly integrated business after all the acquisitions. That is one of the reasons they have gotten into so much trouble in every crisis. It might not be so easy to fix all that in the short term.

 

Fed is supposedly telling them they are too big to manage..

 

fed is trying to look like they are doing some regulating. people are upset that nobody was prosecuted during the crisis. this is the typical political response.

[TorontoRaptorsFan]

I'm not worried. I'll sleep soundly at night. I'll buy some more shares tomorrow morning.

 

[fareastwarriors]

Citi's Stress-Test Mess

 

 

http://online.wsj.com/news/articles/SB10001424052702304688104579463832308656764

[wescobrk]

I chose cheap instead of good.

I should've have stayed with bac

I didn't expect for citi to be 100 percent declined with 7.2 stressed tier 1 while Jpm at 6.3 and bac at 5.9 got approved.

I think corbat should be fired. Two years in a row they failed.

The Fed said they won't address their controls.

Even jpm with the London whale was able to start buying back stock within 6 months.

Citigroup will recover over time and this isn't the end of the world but I think they need a new CEO asap.

 

[rpadebet]

I chose cheap instead of good.

I should've have stayed with bac

I didn't expect for citi to be 100 percent declined with 7.2 stressed tier 1 while Jpm at 6.3 and bac at 5.9 got approved.

I think corbat should be fired. Two years in a row they failed.

The Fed said they won't address their controls.

Even jpm with the London whale was able to start buying back stock within 6 months.

Citigroup will recover over time and this isn't the end of the world but I think they need a new CEO asap.

 

disagree with firing the CEO again!

 

This is not a management problem, this is more of a historical culture problem. This could be a good thing for the bank in the long run, if this leads them to improve their risk controls and get a better handle on their widely dispersed empire.

 

I will wait for more clarity on their exact qualitative problems and how they plan to address it before I decide to add more. If it turns out too costly to improve the controls then there will be more opportunities to add at lower prices.

 

[ourkid8]

I strongly believe the board should now consider splitting this company up.  It seems too big to manage as it has now failed two years in a row.  Management and the board have failed in their fiduciary responsibility to shareholders.  Let's hope this is now on the table.

 

Tks,

S

[alertmeipp]

I strongly believe the board should now consider splitting this company up.  It seems too big to manage as it has now failed two years in a row.  Management and the board have failed in their fiduciary responsibility to shareholders.  Let's hope this is now on the table.

 

Tks,

S

 

how would you split it up?

[rpadebet]

I strongly believe the board should now consider splitting this company up.  It seems too big to manage as it has now failed two years in a row.  Management and the board have failed in their fiduciary responsibility to shareholders.  Let's hope this is now on the table.

 

Tks,

S

 

how would you split it up?

 

Spin off the old Salomon Brothers and keep the commercial bank? Shouldn't be that difficult as they don't seem to be that integrated anyway  ;)

[vinod1]

I chose cheap instead of good.

I should've have stayed with bac

I didn't expect for citi to be 100 percent declined with 7.2 stressed tier 1 while Jpm at 6.3 and bac at 5.9 got approved.

I think corbat should be fired. Two years in a row they failed.

The Fed said they won't address their controls.

Even jpm with the London whale was able to start buying back stock within 6 months.

Citigroup will recover over time and this isn't the end of the world but I think they need a new CEO asap.

 

After the financial crisis, Citigroup has done nothing to integrate or streamline their operations while the rest of the top 6 banks are busy doing just that. Look back over the conference calls, there is nothing during the Pandit reign that indicates he tried to rebuild Citigroup into a more robust organization. A lot of time was just wasted and Citi fell behind the others.

 

Pandit was talking about ridiculous targets like 1/3 trading, 1/3 consumer, 1/3 services. He seemed to think that running off Citi Holdings would just restore profitability. You see that focus in each of the presentations.

 

Give the new CEO some time.

 

I can tell you from working at a much smaller SIFI that it took around 2 1/2 years and an effort costing about 10% of net income to strengthen controls.

 

Vinod

[wescobrk]

That's true pandit was a terrible choice but corbat has been in charge for 18 months.

He's known about this for a year. Disappointing he can't do his job.

To add insult to injury the board paid him 14 million to fail a test he has know about for a year.

[vinod1]

Only after Corbat do we see focus on integration and streamlining of operations.

 

March 5, 2013 Presenation

Our Citicorp efficiency target assumes improvement across each of our core businesses. In Global Consumer, we believe we can achieve an efficiency ratio of between 47% and 50%. Much of that improvement is expected to come from the rollout of our global technology platform and the standardization of products and processes– or the “Drive to Common”, as we call it.

 

Q4, 2013

JOHN GERSPACH: And as I mentioned, as we roll out Rainbow and we move towards standard platforms in Consumer, certainly throughout 2014 there are going be repositioning costs that we take as we continue to streamline the operations. It's not just about moving onto standard platforms. Now once you move onto standard platforms, you want to standardize your processes across the globe. And so that is going to incur some level of repositioning as we move forward. And then we'll continue to look at delayering and rationalization of management structure throughout our businesses.

 

Vinod

[BargainValueHunter]

OK...let's say we are all the C board and we've just decided to golden parachute Mr. Corbat.

 

Who do we hire that is a better manager for a TBTF bank?

[alertmeipp]

I strongly believe the board should now consider splitting this company up.  It seems too big to manage as it has now failed two years in a row.  Management and the board have failed in their fiduciary responsibility to shareholders.  Let's hope this is now on the table.

 

Tks,

S

 

how would you split it up?

 

Spin off the old Salomon Brothers and keep the commercial bank? Shouldn't be that difficult as they don't seem to be that integrated anyway  ;)

 

I am not sure if that will address the qualitative issues tho. It seems Fed is concerning on the international exposure which is their competitive advantage as I see it.

[bennycx]

Only after Corbat do we see focus on integration and streamlining of operations.

 

March 5, 2013 Presenation

Our Citicorp efficiency target assumes improvement across each of our core businesses. In Global Consumer, we believe we can achieve an efficiency ratio of between 47% and 50%. Much of that improvement is expected to come from the rollout of our global technology platform and the standardization of products and processes– or the “Drive to Common”, as we call it.

 

Q4, 2013

JOHN GERSPACH: And as I mentioned, as we roll out Rainbow and we move towards standard platforms in Consumer, certainly throughout 2014 there are going be repositioning costs that we take as we continue to streamline the operations. It's not just about moving onto standard platforms. Now once you move onto standard platforms, you want to standardize your processes across the globe. And so that is going to incur some level of repositioning as we move forward. And then we'll continue to look at delayering and rationalization of management structure throughout our businesses.

 

Vinod

 

Anyone find it really complicated to understand?!

[wescobrk]

Their Basel 3 went from 8.7 to 10.1 last year and it didn't matter with the stress tests.

I suppose shareholders will have to wait another year to make some money.

Maybe with Basel3 at 11.5 and two hundred 50 basis points above what the feds asked they can finally get the qualitative part right.

 

Good point as whom to hire.

I would think with a fourteen million dollar salary we could find someone but it might be difficult to know what is needed with the Fed.

At least dimon did a great job cleaning up the whale. Dimon did in six months what corbat can't seem to do in 18 months (buybacks)

[alertmeipp]

Their Basel 3 went from 8.7 to 10.1 last year and it didn't matter with the stress tests.

I suppose shareholders will have to wait another year to make some money.

Maybe with Basel3 at 11.5 and two hundred 50 basis points above what the feds asked they can finally get the qualitative part right.

 

Good point as whom to hire.

I would think with a fourteen million dollar salary we could find someone but it might be difficult to know what is needed with the Fed.

At least dimon did a great job cleaning up the whale. Dimon did in six months what corbat can't seem to do in 18 months (buybacks)

 

The ratio does matter. Just that, on top of it, Fed wants to see something else like internal controls. Long term, the change will turn Citi into better bank. Short term, I will build a larger position.

[wescobrk]

Even with this disaster they should earn about 14.7 billion this year.

At 47.50 they are 9.7x earnings this year and 8.3 next year.

Even though I'm disappointed they failed with 12 months to prepare, ill continue to add to my position.

 

[rpadebet]

Even with this disaster they should earn about 14.7 billion this year.

At 47.50 they are 9.7x earnings this year and 8.3 next year.

Even though I'm disappointed they failed with 12 months to prepare, ill continue to add to my position.

 

They might need a new plan to fix this and that will cost money. So these earnings estimates might be a bit high