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gordoffh

By gordoffh
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fareastwarriors Newbie

fareastwarriors

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Citi Names New Board Members

 

 

http://www.nytimes.com/reuters/2013/07/08/business/08reuters-citi-board.html?ref=business&_r=0

 

 

Gary Reiner, a former chief information officer at General Electric Co, and James Turley, former chairman and chief executive officer of accounting firm Ernst & Young, were elected to the board, according to an announcement from the company.

 

 

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zippy1 Newbie

zippy1

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Citi reports higher profit, revenue; stock rises

 

Investment banking lifts Citigroup's profit and revenue; financial-crisis era losses shrink

NEW YORK (AP) -- Citigroup is reporting earnings that beat Wall Street's expectations for the second quarter as investment banking profits rose sharply.

 

Profit for the March-to-June period was $3.9 billion after excluding an accounting gain, the bank reported Monday. That's up 26 percent from a year ago.

 

The profit amounted to $1.25 per share, beating the $1.18 per share predicted by analysts polled by FactSet.

http://finance.yahoo.com/news/citi-reports-higher-profit-revenue-141034809.html

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fareastwarriors Newbie

fareastwarriors

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http://online.wsj.com/article/SB10001424127887323664204578607912356899742.html?mod=WSJ_business_MoreArticles

 

A Citi Wall Thicker Than J.P. Morgan's

 

 

 

It isn't often Citigroup C +1.97%gets a chance to show up J.P. Morgan JPM -0.15%Chase. On Monday, it did just that.

 

Discussing second-quarter results, Citi said its leverage ratio under newly proposed rules would have been about 4.9%, just shy of a 5% minimum. That beat the 4.7% J.P. Morgan disclosed Friday.

 

Perhaps more important, Citi gave an idea of what the ratio would be for its bank subsidiary, which will face a 6% minimum. Although it didn't give a second-quarter figure, Citi said this would have been about 6% at the end of March.

 

.P. Morgan, by contrast, said its bank subsidiary's ratio would have been below that of the bank overall. While it didn't give a specific figure, this implied it would have fallen far short of 6%.

 

How short, and so how big a capital hole it will have to fill by 2018, isn't clear. In a report last week, analysts at Keefe, Bruyette & Woods pegged it at about $48 billion.

 

First-quarter filings with bank regulators for both firms' bank subsidiaries highlight the disparity. Under existing rules, Citi's bank unit had a leverage ratio of 9.4%; the firm as a whole was at 7.8%. J.P. Morgan's leverage ratio of 6.3% at its bank subsidiary, though, was a percentage point below the firm's ratio of 7.3%.

 

The irony is that Citi, given its near-death experience in the financial crisis, has had to build capital at a quicker clip, especially within its bank subsidiary. In the first quarter of 2007, Citi's bank had half of the capital it does today.

 

Citi still can't match J.P. Morgan's consistent earnings power, and its stock trades at an about 25% discount on a multiple of price-to-tangible book value. When it comes to its bank subsidiary, though, Citi can claim to have a stronger fortress.

 

 

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yitech Newbie

yitech

Posted
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http://www.sec.gov/Archives/edgar/data/1061768/000114036113032160/xslForm13F_X01/form13fInfoTable.xml

 

Either Baupost is bullish in C or it thinks Citi Warrant A shares are mispriced or both. I would agree with both... and have a bunch.

Yeah, I know it's probably some lottery tickets for them and too small to even matter w.r.t. total size of their portfolio. OK. enough confirmation bias for the day.

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fareastwarriors Newbie

fareastwarriors

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Citigroup Is Dialing Back Its 'Alternative' Holdings

 

Citigroup Has Shed More Than $6 Billion in Private-Equity and Hedge-Fund Assets

 

http://online.wsj.com/article/SB10001424127887324202304579050934194953704.html?mod=WSJ_hp_LEFTWhatsNewsCollection#articleTabs%3Darticle

 

Citigroup Inc. C -0.29% has shed more than $6 billion in private-equity and hedge-fund assets in the past month, according to people familiar with the transactions, in order to comply with new regulations limiting banks' holdings of "alternative" investments.

 

The nation's third-largest bank by assets last week sold a $4.3 billion private-equity fund called Citi Venture Capital International for an undisclosed price to Rohatyn Group, a private-equity fund run by Nick Rohatyn, son of financier Felix Rohatyn, said people familiar with the matter.

 

It couldn't be determined what price the fund fetched.

 

On Aug. 9, Citigroup sold a $1.9 billion emerging-markets hedge fund to the fund's managers, the people said.

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BargainValueHunter Newbie

BargainValueHunter

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http://wallstcheatsheet.com/stocks/citigroup-removing-last-blemish-of-government-bailout.html/?a=viewall

 

Citigroup returned to profitability in 2010, reporting $10.6 billion in net profit for the full year. Still, the full-year numbers were overshadowed by fourth-quarter results, which fell short of Wall Street’s expectations and raised questions over the bank’s investment banking strategy. The bank then hit a setback after it failed to pass the Federal Reserve’s stress test in 2012. But this year, the company’s efforts to streamline operations and its focus on developing core businesses paid off. During this year’s stress test, the bank showed it was strong enough to retain sufficient capital to continue to lend to households and businesses during severely adverse conditions.

 

The financial institution also reported impressive second-quarter results in 2013 with earnings increasing 25 percent, year over year, driven by higher revenues and lower credit losses. Even in the sluggish economy, Citigroup’s total deposits rose 2.6 percent, year over year. However, analysts still remain concerned about the lingering financial crisis-era lawsuits and rising operational expenses. Plus, shares remain 89 percent below the level they traded at five years ago, before the full brunt of the financial crisis hit.

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fareastwarriors Newbie

fareastwarriors

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http://www.citigroup.com/citi/news/2013/131015a.htm

 

 

Citigroup Reports Third Quarter 2013 Earnings per Share of $1.00; $1.02 Excluding CVA/DVA1 and Tax Benefit2

 

Net Income of $3.2 Billion; $3.3 Billion Excluding CVA/DVA and Tax Benefit

 

Revenues of $17.9 Billion; $18.2 Billion Excluding CVA/DVA

 

Net Credit Losses of $2.4 Billion Declined 38% Versus Prior Year Period

 

Loan Loss Reserve Release of $675 Million Versus $1.5 Billion in Prior Year Period

 

Utilized Approximately $500 Million of Deferred Tax Assets

 

Estimated Basel III Tier 1 Common Ratio3 Increased to 10.4%

 

Book Value per Share Increased to $64.49 Tangible Book Value per Share4 Increased to $54.52

 

Citigroup Deposits of $955 Billion and Loans of $658 Billion

 

Citicorp Loans of $561 Billion Grew 5% Versus Prior Year Period

 

Citi Holdings Assets of $122 Billion Declined 29% From Prior Year Period and Represent 6% of Total Citigroup Assets

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racemize Newbie

racemize

Posted
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Hi all,

 

This article says the Citi A Warrants only give you the right to buy 1/10 of a share at the $106 strike. Is that correct?

 

http://www.fool.com/investing/general/2013/10/11/a-difference-in-leverage-between-these-2-bank-warr.aspx

 

That's right.  I'm going to quote myself from the BAC leverage thread, which addresses how this works--no one responded, and I think it is right, but if anyone understands it differently please let me know:

 

Note that the strike price is in "per share" units (at least according to my understanding).  So while, the shares per warrant is now 10, you will have to pay $10 (since it is $1 per share) and not $1 to get the 10 shares.  Saying it another way, the warrant gives you rights to purchasing the 10 shares, but at a price of $1 per share.  As a result, you are in the same situation before and after the dividend, with both the common and the warrant.  Thus, the adjustment to the warrant (both strike and shares) is simply the same as the math for the dividend and repurchase with the common.

 

I'm fairly sure this "per share" unit on the strike price is what is so confusing.  I struggled with this issue on the C warrants for a long time, because the 10:1 split affected both the strike price (increasing it by 10x) and the shares per warrant (decreasing by 10x).  If the units are not "per share" (which is also stated in the SEC filings, e.g., BAC A warrants states "at an exercise price of $13.30 per share"), then the adjustment makes absolutely no sense for them.  I think it would have been simpler to state them without the "per share" units, but here we are. 

 

If someone has interpreted these differently, then please correct me.  Or perhaps everyone already figured that out or knew it, and I was just being dense for a while.

 

Also, here is my spreadsheet which tracks all of the warrants:

https://docs.google.com/spreadsheet/ccc?key=0AhTPR9eP5nWedEF1SGVLdllJTnBMSDMzM3lYZ2d0SlE&usp=sharing

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cubsfan Newbie

cubsfan

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Hi all,

 

This article says the Citi A Warrants only give you the right to buy 1/10 of a share at the $106 strike. Is that correct?

 

http://www.fool.com/investing/general/2013/10/11/a-difference-in-leverage-between-these-2-bank-warr.aspx

 

That's right.  I'm going to quote myself from the BAC leverage thread, which addresses how this works--no one responded, and I think it is right, but if anyone understands it differently please let me know:

 

Note that the strike price is in "per share" units (at least according to my understanding).  So while, the shares per warrant is now 10, you will have to pay $10 (since it is $1 per share) and not $1 to get the 10 shares.  Saying it another way, the warrant gives you rights to purchasing the 10 shares, but at a price of $1 per share.  As a result, you are in the same situation before and after the dividend, with both the common and the warrant.  Thus, the adjustment to the warrant (both strike and shares) is simply the same as the math for the dividend and repurchase with the common.

 

I'm fairly sure this "per share" unit on the strike price is what is so confusing.  I struggled with this issue on the C warrants for a long time, because the 10:1 split affected both the strike price (increasing it by 10x) and the shares per warrant (decreasing by 10x).  If the units are not "per share" (which is also stated in the SEC filings, e.g., BAC A warrants states "at an exercise price of $13.30 per share"), then the adjustment makes absolutely no sense for them.  I think it would have been simpler to state them without the "per share" units, but here we are. 

 

If someone has interpreted these differently, then please correct me.  Or perhaps everyone already figured that out or knew it, and I was just being dense for a while.

 

Also, here is my spreadsheet which tracks all of the warrants:

https://docs.google.com/spreadsheet/ccc?key=0AhTPR9eP5nWedEF1SGVLdllJTnBMSDMzM3lYZ2d0SlE&usp=sharing

 

Fantastic job on this - very helpful in understanding the leverage and crossover points, and annual appreciation needed.

Thanks for making it available.

 

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yitech Newbie

yitech

Posted
Posted

Hi all,

 

This article says the Citi A Warrants only give you the right to buy 1/10 of a share at the $106 strike. Is that correct?

 

http://www.fool.com/investing/general/2013/10/11/a-difference-in-leverage-between-these-2-bank-warr.aspx

 

That's right.  I'm going to quote myself from the BAC leverage thread, which addresses how this works--no one responded, and I think it is right, but if anyone understands it differently please let me know:

 

Note that the strike price is in "per share" units (at least according to my understanding).  So while, the shares per warrant is now 10, you will have to pay $10 (since it is $1 per share) and not $1 to get the 10 shares.  Saying it another way, the warrant gives you rights to purchasing the 10 shares, but at a price of $1 per share.  As a result, you are in the same situation before and after the dividend, with both the common and the warrant.  Thus, the adjustment to the warrant (both strike and shares) is simply the same as the math for the dividend and repurchase with the common.

 

I'm fairly sure this "per share" unit on the strike price is what is so confusing.  I struggled with this issue on the C warrants for a long time, because the 10:1 split affected both the strike price (increasing it by 10x) and the shares per warrant (decreasing by 10x).  If the units are not "per share" (which is also stated in the SEC filings, e.g., BAC A warrants states "at an exercise price of $13.30 per share"), then the adjustment makes absolutely no sense for them.  I think it would have been simpler to state them without the "per share" units, but here we are. 

 

If someone has interpreted these differently, then please correct me.  Or perhaps everyone already figured that out or knew it, and I was just being dense for a while.

 

Also, here is my spreadsheet which tracks all of the warrants:

https://docs.google.com/spreadsheet/ccc?key=0AhTPR9eP5nWedEF1SGVLdllJTnBMSDMzM3lYZ2d0SlE&usp=sharing

 

I am pretty sure that the number of shares per warrant would stay the same (i.e. 1:1). The Citi warrant A&B shares have gone up 10X to reflect 10X proportionally fewer warrant/common outstanding similarly to the common. The "1/10 of a share per warrant" you described is already being reflected by the 1/10 "new" (for lack of a better word) warrants outstanding or 1/10 in proportion to the original warrant holders prior to the conversion. I think you are double-counting here. Warrants standalone or attached to Preferred typically have provisions that says ratios are adjusted proportionally after any splitting or reverse-splitting.

 

Let me ask a simple question. Would the US Treasury have willingly entered this sort of TARP convertible preferred contract where any reverse-splitting of commons would hurt the warrant shareholders (US Treasury before they auctioned them off)? After all, they specifically put some unusual anti-dilution clauses such as dividend protections into the prospectus to prevent some intentional massive dividend paying to keep the stock price under strike.

 

I don't have the prospectus of Citi warrants in front of me, but I would expect these sorts of provision would be quite standard.

 

Some other warrant examples here:

http://www.wikinvest.com/stock/VirtualScopics_(VSCP)/Effect_Reverse_Stock_Split_Options_Warrants_Preferred

http://www.advaxis.com/reverse-split-faqs/

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racemize Newbie

racemize

Posted
Posted

Hi Yitech, that's what I thought when I looked at it initially as well, however, it isn't the case (unless I'm misunderstanding you).  Here's the press release from citi:

 

http://www.wnd.com/markets/news/read/18394533/citigroup_effects_reverse_stock_split

 

scroll down and you can see it is 1/10 of a share in the chart.  Also, here's the prospectus:

http://www.sec.gov/Archives/edgar/data/831001/000095012311004665/y89177b7e424b7.htm

 

 

So, if it did indeed cost you $106 dollars for 0.1 shares, that would be double counting as you say.  The trick to this is that it is $106 per share, so then it costs you 10.6 for 0.1 shares, which is back to where we started. 

 

The interesting thing is that once you understand that (assuming it is true), then it affects the BAC warrants, e.g., when we get to 1.2 shares per warrant you are still paying the strike at the per share value.  So let's say it is a strike of $10 with 1.2 shares per warrant, we will have to pay $12 for the 1.2 shares, not $10.

 

Please let me know if you read it differently.

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racemize Newbie

racemize

Posted
Posted

hmm... I think you may be reading too much in the Press release.

 

Warrant Share Number After Adjustment: 1/10th of one share of common stock

Warrant Share Number prior to adjustment proportionally adjusted in light of combination of shares = 1 / 10 =1/10

 

The 1/10 describes 1/10th of warrants shares number outstanding as a result and presumably it means the number of shares prior to the event.

 

All I can find on the adjustments to the warrants from the prospectus are below:

 

On S-21 of the prospectus:

 

Adjustments to the Warrants

 

Pursuant to the terms of the warrants, the number of shares of Common Stock issuable upon exercise of each warrant, or the warrant shares, and the warrant exercise price will be adjusted upon occurrence of certain events as follows.

 

In the case of stock splits, subdivisions, reclassifications or combinations of Common Stock.  If Citigroup declares and pays a dividend or makes a distribution on the Common Stock in shares of Common Stock, subdivides or reclassifies the outstanding shares of the Common Stock into a greater number of shares, or combines or reclassifies the outstanding shares of the Common Stock into a smaller number of shares, the number of warrant shares at the time of the record date for such dividend or distribution or the effective date of such subdivision, combination or reclassification will be proportionately adjusted so that the holder of a warrant after such date will be entitled to purchase the number of shares of Common Stock that it would have owned or been entitled to receive in respect of the number of warrant shares had such warrant been exercised immediately prior to such date. The exercise price in effect immediately prior to the record date for such dividend or distribution or the effective date of such subdivision, combination or reclassification will be adjusted by multiplying such exercise price by the quotient of (x) the number of warrant shares immediately prior to such adjustment divided by (y) the new number of warrant shares as determined in accordance with the immediately preceding sentence.

 

 

Well, not exactly crystal clear what was described above, but I am still interpreting things similarly and let the proper logic guide me in the same way... since there is nothing unusual about this warrant that stands out versus others in similar warrant provision. Anyhow, we can agree to disagree in terms of interpretations...

 

I'm really not sure what you are saying, so could you provide some clarity?  The "warrant share" is the term that means "the number of shares of Common Stock issuable upon exercise of each warrant", which is at the top of your quote.  The citigroup press release makes it clear that the warrant shares before adjustment was 1 (meaning you could use the warrant to get 1 share) and afterwards it is 0.1 (meaning you could use the warrant to get 0.1 shares).  That is also what the quoted language means, I believe.  Do you disagree with the above?  I'm still not exactly sure what you are saying, so please help me out.

 

Are you saying that you think the number of warrants outstanding actually changed?  i.e., that someone having 10 warrants now has 1?  I don't think that is what happened--these adjustments made it so they did not have to change the warrants outstanding.

 

Here is the math for what I'm talking about, and I really do want to make sure that this is right--can you please let me know where you disagree?

 

Prior to Adjustment:

Strike price - $10.61

Warrant Shares (or number of common shares that can be purchased with one warrant) - 1

So you could spend $10.61 and get 1 share

 

After Adjustment:

Strike Price - $106.1

Warrant Shares - 0.1

So you can spend $ 10.61 (which is 0.1 shares * 106.1 dollars / share) to get 0.1 shares

 

As you can see, the math is exactly the same before and after.

 

 

I also don't think this is different than other warrants.  For example, the ones you cited earlier all do exactly what I'm saying--decrease the number of shares that can be gotten, and increase the price per share by proportional amounts.  This is exactly what is happening here, it is just a bit strange since you are entitled to less than a full share per warrant now.

 

More specifically, looking at one of your examples:

For example, assume that a 1-for-2 reverse stock split is implemented and that an optionee holds options to purchase 1,000 shares at an exercise price of $1.00 per share. On the effectiveness of the 1-for-2 reverse stock split, the number of shares subject to that option would be reduced to 500 shares and the exercise price would be proportionately increased to $2.00 per share. In connection with the reverse stock split, the number of shares of common stock issuable upon exercise or conversion of outstanding stock options and warrants will be rounded to the nearest whole share and no cash payment will be made in respect of such rounding. In addition, the proposed reverse stock split will reduce the number of shares of common stock available for future issuances under our 2006 Long Term Incentive Plan in proportion to the exchange ratio selected by our Board of Directors within the limits set forth in this proposal.

 

So, prior to adjustment:

the contract allows you to purchase 1,000 shares at $1.00 per share.  Putting this in the same terms as the warrants above:

strike price - $1

warrant shares - 1,000

So, you could buy 1,000 shares at $1 a piece

 

After adjustment:

strike price - $2

warrant shares - 500

Now, you can buy 500 shares at $2 a piece

 

This is the same as going from 1 share at 10.61 per share to 0.1 shares at 106.1 per share.

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