C - Citibank

[fareastwarriors]

Citigroup Gets Approval for Corbat’s $1.2 Billion Buyback

 

 

http://www.bloomberg.com/news/2013-03-14/citigroup-gets-approval-for-corbat-s-1-2-billion-buyback.html

 

nothing new here

[racemize]

I've been updating my options/warrants spreadsheet to include all the still remaining warrants, and I'm having some trouble with the C warrants.  After the reverse split, what were the adjustments to the warrants?

 

I've read that it adjusted the strike price up 10x and the shares per warrant down by 10x (to 0.1), but that has made my calculations yield some very strange results--i.e., showing that to be "in the money" the common price would have to get to >$1,000.  It seems like it should only adjust the strike price and not the shares per warrant at the same time (or vise versa). 

 

Or perhaps the warrants themselves also went under a reverse split?--but that would essentially mean the shares per warrant would go back up to 1.  In any event, it seems like the result should be 1 share per warrant, but strike prices of 106 and 178. 

 

If any of you have already studied this, can you let me know where I'm off in the above?

[yitech]

I've been updating my options/warrants spreadsheet to include all the still remaining warrants, and I'm having some trouble with the C warrants.  After the reverse split, what were the adjustments to the warrants?

 

I've read that it adjusted the strike price up 10x and the shares per warrant down by 10x (to 0.1), but that has made my calculations yield some very strange results--i.e., showing that to be "in the money" the common price would have to get to >$1,000.  It seems like it should only adjust the strike price and not the shares per warrant at the same time (or vise versa). 

 

Or perhaps the warrants themselves also went under a reverse split?--but that would essentially mean the shares per warrant would go back up to 1.  In any event, it seems like the result should be 1 share per warrant, but strike prices of 106 and 178. 

 

If any of you have already studied this, can you let me know where I'm off in the above?

 

I believe in any reverse-split/split, the strike is multiplied/divided by the ratio and share counts divided/multiplied accordingly. This is true for any option/LEAP/warrant and should be in the prospectus. The reverse-split didn't add any value to the shareholders, but prospective buyers of the less liquid warrants (vs the common) would get less ripped off by the brokers due to narrower bid-ask spread possible.

[racemize]

I've been updating my options/warrants spreadsheet to include all the still remaining warrants, and I'm having some trouble with the C warrants.  After the reverse split, what were the adjustments to the warrants?

 

I've read that it adjusted the strike price up 10x and the shares per warrant down by 10x (to 0.1), but that has made my calculations yield some very strange results--i.e., showing that to be "in the money" the common price would have to get to >$1,000.  It seems like it should only adjust the strike price and not the shares per warrant at the same time (or vise versa). 

 

Or perhaps the warrants themselves also went under a reverse split?--but that would essentially mean the shares per warrant would go back up to 1.  In any event, it seems like the result should be 1 share per warrant, but strike prices of 106 and 178. 

 

If any of you have already studied this, can you let me know where I'm off in the above?

 

I believe in any reverse-split/split, the strike is multiplied/divided by the ratio and share counts divided/multiplied accordingly. This is true for any option/LEAP/warrant and should be in the prospectus. The reverse-split didn't add any value to the shareholders, but prospective buyers of the less liquid warrants (vs the common) would get less ripped off by the brokers due to narrower bid-ask spread possible.

 

Sure, I was just trying to confirm the actual changes that have happened, as what I've read doesn't seem to make sense, given the math.  I'll keep digging around if no one knows.

[Sunrider]

For what it's worth I see one of the C warrants on IB as 106.1 with a 0.1 multiplier.

 

 

I've been updating my options/warrants spreadsheet to include all the still remaining warrants, and I'm having some trouble with the C warrants.  After the reverse split, what were the adjustments to the warrants?

 

I've read that it adjusted the strike price up 10x and the shares per warrant down by 10x (to 0.1), but that has made my calculations yield some very strange results--i.e., showing that to be "in the money" the common price would have to get to >$1,000.  It seems like it should only adjust the strike price and not the shares per warrant at the same time (or vise versa). 

 

Or perhaps the warrants themselves also went under a reverse split?--but that would essentially mean the shares per warrant would go back up to 1.  In any event, it seems like the result should be 1 share per warrant, but strike prices of 106 and 178. 

 

If any of you have already studied this, can you let me know where I'm off in the above?

 

I believe in any reverse-split/split, the strike is multiplied/divided by the ratio and share counts divided/multiplied accordingly. This is true for any option/LEAP/warrant and should be in the prospectus. The reverse-split didn't add any value to the shareholders, but prospective buyers of the less liquid warrants (vs the common) would get less ripped off by the brokers due to narrower bid-ask spread possible.

 

Sure, I was just trying to confirm the actual changes that have happened, as what I've read doesn't seem to make sense, given the math.  I'll keep digging around if no one knows.

[racemize]

I've been updating my options/warrants spreadsheet to include all the still remaining warrants, and I'm having some trouble with the C warrants.  After the reverse split, what were the adjustments to the warrants?

 

I've read that it adjusted the strike price up 10x and the shares per warrant down by 10x (to 0.1), but that has made my calculations yield some very strange results--i.e., showing that to be "in the money" the common price would have to get to >$1,000.  It seems like it should only adjust the strike price and not the shares per warrant at the same time (or vise versa). 

 

Or perhaps the warrants themselves also went under a reverse split?--but that would essentially mean the shares per warrant would go back up to 1.  In any event, it seems like the result should be 1 share per warrant, but strike prices of 106 and 178. 

 

If any of you have already studied this, can you let me know where I'm off in the above?

 

Turns out it was my math!  Now fixed.

[fareastwarriors]

http://online.wsj.com/article/SB10001424127887323415304578369012597351572.html?mod=WSJ_hp_LEFTWhatsNewsCollection

 

 

Citi Settles Case for $730 Million

 

Large Payment Resolves Investor Claims That Bank Misled Them in Several Bond, Preferred Offerings.

[vinod1]

I think Berkowitz got this one wrong as far as his estimates of Citi's earnings are concerned. He suggested they can earn about $10 per share ($1 per share pre reverse split) and although he did not lay out a timeline, 5 years out would be a reasonable estimate. He made these comments I think in early 2011 or late 2010.

 

New CEO has set a target ROTCE of 10% for 2015. At 2012 YE, the tangible common equity is $155 billion and should be about $180 billion by the end of 2015. This suggests a net income of $18 billion or about $6 per share in 2015. DTA's would increase the FCF to probably about $7 per share.

 

Did not follow Citi for a while and just got around to looking at their recent presentation. The only reason I bring this up is because I spent some serious time trying to understand how he got to $10 EPS and I have never been able to get past $7.5 in my most optimistic case. I still lost a little money on this. :)

 

Anyone still following this?

 

Vinod

[alertmeipp]

you model any buyback?

[BargainValueHunter]

I'd love to see Berkowitz's Citi presentation. Is there a link?

[vinod1]

you model any buyback?

 

No, but it only marginally changes the numbers. $15 billion over the next two years would reduce the share count by about 10%.

 

Vinod

[ERICOPOLY]

I think Berkowitz got this one wrong as far as his estimates of Citi's earnings are concerned. He suggested they can earn about $10 per share ($1 per share pre reverse split) and although he did not lay out a timeline, 5 years out would be a reasonable estimate. He made these comments I think in early 2011 or late 2010.

 

He has now held his BAC for about 2 years -- he bought in somewhere around $14.  It will be about a 10% annual return for him if BAC is at $23 in 3 years.  Not a bad return, but hardly phenomenal.  So it seems like he may have been wrong on BAC as well, I mean if you listen to him talk about it he seems to be expecting to have made more than 10% a year.

 

[wescobrk]

 

you model any buyback?

 

No, but it only marginally changes the numbers. $15 billion over the next two years would reduce the share count by about 10%.

 

Vinod

 

It depends on what everyone agrees on what intrinsic value is AND assuming the stock stays where it is. I've seen some on the board argue IV (undiscounted) is 24 a share since the 2 bucks a share is there once LAS is gone, therefore, again assuming the stock doesnt go up, but this would increase IV by 20% if they shrank shares by 10%,which would be material.

[wescobrk]

I apologize Vinod since I alluded to BAC and you were probably discussing Citi

[ERICOPOLY]

but this would increase IV by 20% if they shrank shares by 10%,which would be material.

 

IV doesn't grow 20% if share count is reduced by 10%.

 

Not even if the price paid for the shares were 1 cent.

 

 

[wescobrk]

Quote from: wescobrk on Today at 08:39:27 AM

but this would increase IV by 20% if they shrank shares by 10%,which would be material.

 

IV doesn't grow 20% if share count is reduced by 10%.

 

Not even if the price paid for the shares were 1 cent.

 

I disagree. If you and I own a business and let's say it's worth 1k total. But you are feeling despondent and sell your half in the business to me based not on 1k worth but 500 dollar value then I just bought at half the value, thus my return is 50%. If I should pay you 500 for your half share of a 1k business but you accept 250, I could theoretically turn around and sell half of the business to someone else for 500 earning a nice 250 profit or 50 per cent return on my original 500 investment.

[wescobrk]

Actually I guess IV would only go up 25% in that example (the 250 I made off of you selling your half at a 50 percent discount) 250 profit plus 1k original IV

[wescobrk]

I should have originally said IV would go up 5% if buy out 10% of other partners at a 50% discount.

[ERICOPOLY]

I should have originally said IV would go up 5% if buy out 10% of other partners at a 50% discount.

 

I don't disagree with that.

[BargainValueHunter]

http://www.reuters.com/article/2013/04/15/us-citigroup-results-idUSBRE93E0HM20130415

 

Citigroup Inc reported a higher-than-expected 31 percent rise in first-quarter profit on Monday as it drew down loss reserves for mortgage loans, and revenue from its securities and investment banking business swelled.

 

The No. 3 U.S. bank's said net income rose to $3.8 billion, or $1.23 per share from $2.9 billion, or 95 cents per share, a year earlier.

 

Excluding certain accounting adjustments in both periods, net income rose to $4.0 billion, or $1.29 per share, from $3.4 billion, or $1.11 per share.

 

Analysts on average had forecast earnings of $1.17 per share before the certain accounting adjustments.

[PlanMaestro]

http://www.thestreet.com/story/11842652/2/citigroups-tax-benefit-at-55-billion-and-rising-raises-questions-and-causes-concerns.html

[fareastwarriors]

Citi CEO: Bank's Major Restructuring Is Over .

 

Citigroup Inc.'s C +1.42%top executives said the bank will continue to favor share repurchases over dividends and that the post-crisis period of substantial bank restructuring is over.

 

Chairman Michael O'Neill and Chief Executive Michael Corbat led their first annual shareholder meeting after a tumultuous year when Citi's capital levels improved, but investors remained unnerved by volatile earnings, the abrupt resignation by Mr. Corbat's predecessor and the Federal Reserve denying the bank's plan to buy back shares.

 

On Wednesday, Citi said more than 90% of shareholders approved the company's changed compensation plan after shareholders last year had rejected it. Shareholders on Wednesday also approved the directors up for election. The exact vote count hasn't been disclosed.

 

Three shareholder proposals failed to win a majority. The proposals, all opposed by the bank, were designed to have senior executives hold until retirement a significant percentage of shares received as compensation, to require a report on Citi's lobbying efforts and to restrict directors' indemnification.

 

Mr. O'Neill took over after the retirement of Richard Parsons at last year's annual meeting. Mr. Corbat was promoted to chief executive in October after the sudden resignation of Vikram Pandit, who had clashed with the board.

 

Much work remains to be done, both Mr. O'Neill and Mr. Corbat told shareholders, particularly in shrinking the assets and divesting businesses Citi has long determined don't fit with its strategy. But Citi won't need to break up, or designate new parts of the company for divestiture, both said.

 

"We made Citi a smaller, safer institution," Mr. Corbat said repeatedly. Mr. O'Neill said, "Dismembering [Citi] in an uneconomic way does not strike me as looking after the interest of shareholders in the best way."

 

After passing the most recent Fed stress test in March, Citi said the Federal Reserve approved a $1.2 billion common stock buyback program through the first quarter of 2014, and the current quarterly common stock dividend of 1 cent per share. It had not asked for a dividend increase.

 

"We felt this year, this was the right way to start," Mr. Corbat said. "We are committed to return more capital to shareholders" and "over time we try to get the right balance" between buybacks and dividend increases, he said.

 

Mr. O'Neill, meanwhile, told shareholders that the main work in shrinking Citi has been done. "Look at the performance of Citicorp: It's quite respectable," he said about the division that is Citi's core lending and capital markets business.

 

"We have the makings here of a very attractive company," he said. "What we are doing now makes the most sense."

 

Mr. Corbat said Citi has to do more to deliver the earnings that would prove Citi's strategy. "But give me some time," he answered in response to CLSA securities analyst Michael Mayo, who had asked whether Citi would be better off breaking up.

 

Mr. Mayo made the unusual decision for a securities analyst to buy shares in Citi and other banks, including Morgan Stanley MS -0.74%and regional lender KeyCorp, KEY +1.46%to question management and directors at their annual meetings.

 

Mr. Corbat vowed he won't be satisfied until the company rebuilds its credibility with shareholders, and reiterated his top priority to generate consistent earnings.

 

Last week, Citi reported a better-than-expected first-quarter profit of $3.8 billion, up 30% from a year earlier. Excluding a $198 million charge for a valuation adjustment on Citi's own debt, the bank earned $1.29 a share, exceeding the $1.17-a-share consensus estimate of analysts surveyed by Thomson Reuters.

 

 

[BargainValueHunter]

Citi "A" TARP warrants up nearly 10% today and have been on a rip lately. :)

[dcollon]

More liability management:

 

Citigroup Announces Upsizing of Offers to Purchase Four Series of Outstanding Notes

Friday, May 31, 2013 02:30:00 PM (GMT)

 

 

Citigroup Inc. (“Citigroup”) announced today that it has increased the maximum aggregate principal amount of Notes that it will accept for purchase (the “Overall Tender Cap”) pursuant to its previously announced cash tender offers (each, an “Offer” and, collectively, the “Offers”) with respect to each series of notes listed in the tables below (the “Notes”), from US$400,000,000 to US$650,000,000.

 

These Offers are consistent with Citigroup's liability management strategy, and reflect its ongoing efforts to enhance the efficiency of its funding and capital structure. Since the beginning of 2012, Citigroup has retired approximately US$22.7 billion of senior debt, subordinated debt, preferred and trust preferred securities, reducing Citigroup’s overall funding costs and efficiently deploying its ample liquidity. Citigroup will continue to consider opportunities to redeem or repurchase securities, based on several factors, including without limitation, the economic value, potential impact on Citigroup's net interest margin and borrowing costs, the overall remaining tenor of Citigroup's debt portfolio, as well as overall market conditions.

 

[BargainValueHunter]

http://www.cnbc.com/id/100823752

 

The bank is not feeling generous—it is just looking to use up $55 billion of tax credits and deductions, known as deferred tax assets, as of the end of March.

 

It had accumulated them from losses and foreign tax payments largely during and after the financial crisis. About 95 percent of these future tax benefits are in the United States.

 

Realizing these benefits over time could be worth some $27 billion to Citigroup today, or about $9 per share for a stock that trades at around $50 a share, according to John McDonald, a veteran bank analyst at Sanford C. Bernstein.

 

Using all these assets will free up more than $40 billion, about one-third, of the bank's capital. Citigroup could then return more capital to shareholders through stock-boosting moves like share buybacks.