C - Citibank

[yitech]

I was editing my post and was going reply you saying you are right!

Oh well, time to exit the speculation.

Thanks for letting me know before this turns to a costly mistake!

[racemize]

I was editing my post and was going reply you saying you are right!

Oh well, time to exit the speculation.

Thanks for letting me know before this turns to a costly mistake!

 

No worries, this drove me a little insane when I was thinking about it a few months ago.  It wasn't until I looked at a few examples, like the ones you posted, that it finally clicked for me.

 

The interesting thing is that it takes a dramatic change (e.g., a 10-1 split) to really have to figure it out.  Previously, I thought the BAC A warrants would end up where you get 1.2 shares for $10 (following my previous example with 1.2 warrant shares and $10 strike), but now I'm pretty sure it is $12 for the 1.2 shares, since it is expressed in "per share" metrics.

[ERICOPOLY]

I was editing my post and was going reply you saying you are right!

Oh well, time to exit the speculation.

Thanks for letting me know before this turns to a costly mistake!

 

No worries, this drove me a little insane when I was thinking about it a few months ago.  It wasn't until I looked at a few examples, like the ones you posted, that it finally clicked for me.

 

The interesting thing is that it takes a dramatic change (e.g., a 10-1 split) to really have to figure it out.  Previously, I thought the BAC A warrants would end up where you get 1.2 shares for $10 (following my previous example with 1.2 warrant shares and $10 strike), but now I'm pretty sure it is $12 for the 1.2 shares, since it is expressed in "per share" metrics.

 

I'm relatively certain it's $12.  This is just a dividend reinvestment plan.

[bobp]

I think the easiest way to think of Citi warrants are 10 warrants plus 106 buys 1 share. So you're paying 6.50 for a strike price of 106 with six years remaining.

[fareastwarriors]

Citi Bike: Citibank's New York Marketing Coup

 

http://www.businessweek.com/articles/2013-10-31/citi-bike-citibanks-new-york-marketing-coup#p1

[dcollon]

From Bankstocks.com

 

Whose money is Sandy Weill giving away, really?

http://www.bankstocks.com/ArticleViewer.aspx?ArticleID=6680&ArticleTypeID=2

 

[fareastwarriors]

 

http://dealbook.nytimes.com/2013/12/01/quiet-boss-at-citigroup-setting-tone-for-wall-street/?ref=international

 

 

 

Quiet Boss at Citigroup Setting Tone for Wall Street

[CorpRaider]

Citi and BAML 'bout to get hit with civil fraud charges:

 

http://finance.yahoo.com/news/u-preparing-civil-charges-against-223238599.html

[stylized_fact]

Some insiders are unhappy with Citi's cost-cutting agenda.

 

http://www.ft.com/intl/cms/s/0/ec4e0470-61aa-11e3-916e-00144feabdc0.html

[fareastwarriors]

Some insiders are unhappy with Citi's cost-cutting agenda.

 

http://www.ft.com/intl/cms/s/0/ec4e0470-61aa-11e3-916e-00144feabdc0.html

 

 

Then they are not gona like the smaller bonus even more

http://www.bloomberg.com/news/2013-12-18/citigroup-said-to-plan-flat-or-smaller-bonuses.html

[fareastwarriors]

http://www.ft.com/intl/cms/s/3/373355b4-6834-11e3-8ada-00144feabdc0.html#axzz2pGdN3tye

 

 

Citigroup: work in progress

 

 

 

Citigroup may be feeling like the odd man out. It shares rallied 30 per cent in 2013. But, unlike other US megabanks, it still trades just below its tangible book value. At $52, Citigroup stock is at 96 per cent of its tangible book value per share.

 

 

Citi’s shares gained as a new chief executive, and his plans to cut 11,000 staff and sell or scale back operations in some countries, were met with initial optimism. Mike Corbat took over as chief executive in October 2012 after the ousting of Vikram Pandit. Five years after the financial crisis, troubled assets have also become less of a drag on profitability. Citi Holdings, which houses them, had a 29 per cent drop in assets in the third quarter against a year ago. And the bank sailed through the Federal Reserve’s stress tests in 2013. The Fed approved Citi’s request for a modest $1.2bn buyback after rejecting its plan in 2012.

 

So why the discount to its peers? One of the biggest reasons is $53bn of deferred tax assets that Citi amassed in the years around the crisis. By the third quarter, DTAs represented a big chunk of tangible book value per share – about $17 out of $55. In 2013, Citi began reducing its DTAs; it utilised $1.8bn through the third quarter. But whittling down this mountain will be a long process so investors apply a discount. This year, market participants have also grown less bullish on emerging markets and the companies (such as Citi) that have exposure to them.

 

For Citi to trade above tangible book value, it must keep showing it can use the DTAs. More progress winding down Citi Holdings will also be important. It also needs to return more capital to shareholders. The last part, as Citi learnt the hard way in 2012, is a delicate one. Shareholders are eager for a more aggressive plan this year, but no bank wants to risk a failing grade from regulators.

[moody202]

Citi and BAML 'bout to get hit with civil fraud charges:

 

http://finance.yahoo.com/news/u-preparing-civil-charges-against-223238599.html

 

 

What is the general opinion on this forum about additional lawsuits against Citi or BOA? Is this still a good time to invest in these companies?

[ERICOPOLY]

Citi and BAML 'bout to get hit with civil fraud charges:

 

http://finance.yahoo.com/news/u-preparing-civil-charges-against-223238599.html

 

 

What is the general opinion on this forum about additional lawsuits against Citi or BOA? Is this still a good time to invest in these companies?

 

BofA is probably undervalued by about $4.70 per share, minimum.  So that's like $54 billion (after tax).  Or about $77 billion pre-tax lawsuit charges above and beyond what they've already reserved for (assuming 30% tax rate).

 

So... what do you think the lawsuits will run them? 

 

EDIT:

13% ROTE is 21.60 per share at P/E of 12x.  Less 40 cents for 2014, less 20 cents for 2015, is $21.00.  Then you add in $1.10 for the DTA.  That gets you to $22.10 -- and $22.10 is $4.70 per share above the current price.  That's "minimum", because they can do better than 13% ROTE.

[goldfinger]

22.10 is 5.69$ above the current share price  ::)

[jay21]

http://www.ft.com/intl/cms/s/3/373355b4-6834-11e3-8ada-00144feabdc0.html#axzz2pGdN3tye

 

 

Citigroup: work in progress

 

 

 

Citigroup may be feeling like the odd man out. It shares rallied 30 per cent in 2013. But, unlike other US megabanks, it still trades just below its tangible book value. At $52, Citigroup stock is at 96 per cent of its tangible book value per share.

 

 

Citi’s shares gained as a new chief executive, and his plans to cut 11,000 staff and sell or scale back operations in some countries, were met with initial optimism. Mike Corbat took over as chief executive in October 2012 after the ousting of Vikram Pandit. Five years after the financial crisis, troubled assets have also become less of a drag on profitability. Citi Holdings, which houses them, had a 29 per cent drop in assets in the third quarter against a year ago. And the bank sailed through the Federal Reserve’s stress tests in 2013. The Fed approved Citi’s request for a modest $1.2bn buyback after rejecting its plan in 2012.

 

So why the discount to its peers? One of the biggest reasons is $53bn of deferred tax assets that Citi amassed in the years around the crisis. By the third quarter, DTAs represented a big chunk of tangible book value per share – about $17 out of $55. In 2013, Citi began reducing its DTAs; it utilised $1.8bn through the third quarter. But whittling down this mountain will be a long process so investors apply a discount. This year, market participants have also grown less bullish on emerging markets and the companies (such as Citi) that have exposure to them.

 

For Citi to trade above tangible book value, it must keep showing it can use the DTAs. More progress winding down Citi Holdings will also be important. It also needs to return more capital to shareholders. The last part, as Citi learnt the hard way in 2012, is a delicate one. Shareholders are eager for a more aggressive plan this year, but no bank wants to risk a failing grade from regulators.

 

Citi is still below TBV?  Time to start digging in.

[fareastwarriors]

http://online.wsj.com/news/articles/SB10001424052702304887104579304763323816216?mod=WSJ_Markets

 

 

Citi Tiptoes Through the Dividend Field

 

 

...

Citi now sports some of the highest capital ratios among big banks, setting the stage for it to try to raise its dividend and undertake a chunkier capital return overall. The question for investors is how aggressive Citi will be.

 

It is doubtful that chief Michael Corbat, mindful of his predecessor's misstep, will try to awe investors. Wall Street analysts estimate the bank is likely to shoot for a capital return of as much as $7.5 billion from the second quarter of 2014 to the first quarter of 2015, the period covered by the Fed's stress-test process.

 

That seems reasonable, even if Citi would appear to have room to do more. Sanford C. Bernstein estimates the bank will finish 2013 with a Tier 1 common ratio under Basel III rules at 10.8%, up from 8.7% a year earlier and above its peers. It is also forecast to earn about $16 billion in 2014.

...

[fareastwarriors]

http://www.bloomberg.com/news/2014-01-07/citigroup-said-to-weigh-sale-of-1-billion-in-fund-stakes.html

 

Citigroup Said to Weigh Sale of $1 Billion in Fund Stakes

[alertmeipp]

Down 3% premarket on earning missing. Used to be, international banks demand higher multiple than domestic, how things have changed. Still below TBV while BAC is way above now. (I know the DTA is a big factor on TBV, but still)

 

 

http://finance.yahoo.com/news/citigroup-reports-fourth-quarter-2013-125900497.html

 

 

Fourth Quarter Net Income of $2.7 Billion; $2.6 Billion Excluding CVA/DVA and Impact of the Credicard Divestiture

Fourth Quarter Revenues of $17.8 Billion; $17.9 Billion Excluding CVA/DVA

Fourth Quarter Net Credit Losses of $2.5 Billion Declined 15% versus Prior Year Period

Utilized Approximately $600 Million of Deferred Tax Assets

Estimated Basel III Tier 1 Common Ratio of 10.5%3

Estimated Basel III Supplementary Leverage Ratio of 5.4%4

Book Value Per Share Increased to $65.31

Tangible Book Value Per Share5 Increased to $55.38

Citigroup Deposits of $968 Billion Grew 4% versus Prior Year Period

Citicorp Loans of $575 Billion Grew 7% versus Prior Year Period

Citi Holdings Assets of $117 Billion Declined 25% from Prior Year Period and Represented 6% of Total Citigroup Assets at Year End 2013

[ourkid8]

3.6% below TBV.  What is the cost savings opportunity with C?  Is it anything similar to BAC?  I apologize, i have not dug further on this investing but I am now very interested...

 

Tks,

S

[wescobrk]

I bought citi today for the first time in life.

My bet is it'll be above tbv after ccar is announced.

10.5 Basel 3.

I'm not as comfortable with it as bac but I love the price.

 

[racemize]

I bought citi today for the first time in life.

My bet is it'll be above tbv after ccar is announced.

10.5 Basel 3.

I'm not as comfortable with it as bac but I love the price.

 

Similar for me, except I did it before the earnings.  Doh!

[ERICOPOLY]

3.6% below TBV.  What is the cost savings opportunity with C?  Is it anything similar to BAC?  I apologize, i have not dug further on this investing but I am now very interested...

 

Tks,

S

 

My question is how much opportunity is there from higher rates.  We know about BAC's huge low-cost deposit base -- they benefit from the short-term securities portfolio earning more money from higher short-term rates.

 

Does C have the same opportunity?  I recall C having an inferior funding model.

[ourkid8]

No idea... Anyone a Citibank SME?

 

3.6% below TBV.  What is the cost savings opportunity with C?  Is it anything similar to BAC?  I apologize, i have not dug further on this investing but I am now very interested...

 

Tks,

S

 

My question is how much opportunity is there from higher rates.  We know about BAC's huge low-cost deposit base -- they benefit from the short-term securities portfolio earning more money from higher short-term rates.

 

Does C have the same opportunity?  I recall C having an inferior funding model.

[Hawks]

wescobrk

ditto your remarks.

[fareastwarriors]

 

Third Time Won't Be a Charm for Citi

 

 

 

http://online.wsj.com/news/articles/SB10001424052702304419104579324830814691064?mod=WSJ_Heard_LEFTTopNews

 

Wall Street hates it when companies fail to clear the expectations bar. But as Citigroup C -4.35% saw Thursday, it really hates it when that happens after the bar already has been lowered.

 

Over the six weeks or so before Citi's fourth-quarter report, analyst estimates for earnings fell by nearly 20 cents to 95 cents a share, according to FactSet. Even so, Citi came up short, posting earnings of 82 cents after adjusting for certain accounting charges.

 

That was driven by weakness in its fixed-income operations and lower mortgage revenue thanks to the plunge in refinance activity, as well as the continued drag of elevated legal costs. Not that the result was terrible. Fourth-quarter net income, adjusted for certain items, was up around 20% year over year. And operating expenses in its core business were down 4% from a year earlier while loans increased 7%.

 

Still, expectations matter, especially since a stumble raises questions about Citi's ability to meet 2015 targets of return on assets of 0.9 to 1.1 percentage points and a return on tangible common equity of 10%. For 2013, Citi was at 0.74 percentage points and 7.1%, respectively, on those measures.

 

Plus, Citi is working against the clock in consuming some deferred tax assets—effectively an IOU it can apply against future taxes—that expire in coming years. It continued to make progress, reducing those by $2.4 billion in 2013.

 

Ongoing losses in legacy holdings the bank is winding down, though, work against some of this progress. That makes it imperative that Citi more quickly gets these to a break-even state. That is an even bigger priority given the tax asset ties down about $40 billion in capital.

 

So far, Citi is staying the course with restructuring and expense-reduction plans. Chief Executive Michael Corbat said the bank isn't "looking for any big moves here in terms of the strategy of the firm." And Citi's capital levels remain strong, keeping alive hopes it may be able to increase its quarterly dividend of a penny a share this year.

 

Having now fallen short of Wall Street forecasts for two consecutive quarters, though, a third miss might require Citi to consider more radical action.