Tags: Citigroup | investors | crisis | C

Citigroup Investors Wary of New Crisis

By Tim Plaehn   |   Thursday, 13 Oct 2011 05:19 PM

Banking giant Citigroup (C) has had all of its financial numbers going in the right direction since coming out of the 2007 and 2008 financial crisis. However, the investing public remains wary of Citi and the other money center banks on fears another global financial crisis could be on the horizon. They are concerned that these companies are not in shape to weather another round of trouble.

Citigroup is a global money center bank. Revenues are generated through consumer banking products and institutional services and products. Revenues across the different product lines are fairly evenly split between North American operations and Citi's international businesses.

In the second quarter of 2011, Citigroup generated revenues of $20.6 billion, down from $22.1 billion in the same quarter of 2010. Revenues increased by $900 million compared to the first quarter of 2011. Net income for the quarter was $1.09 per share, up 21 percent from the 90 cents earned a year earlier.

The consensus earnings estimate for full year 2011 is $3.91 per share compared to the $3.50 earned in 2010. Wall Street estimates Citigroup will earn $4.85 in 2012.

Toxic assets

The good news on earnings growth and expected future earnings growth has not helped the Citigroup share price. Since completing a 10-for-1 reverse stock split in early May, the share price of Citi declined by 40 percent by the end of the third quarter while the overall market was off about 15 percent.

Citi has sequestered its problem assets into a separate company called Citi Holdings. The assets of Citi Holdings declined to $308 billion from $465 billion over five quarters yet still produced a credit loss of $2 billion in the second quarter.

The Citi Holdings assets represent about 16 percent of the total Citigroup assets. Added to this large pile of troubled assets is the almost daily news of lawsuits against the company concerning lending and investment sales practices that led up to the financial crisis.

Recently, the analysts at Oppenheimer reiterated an outperform rating on Citi but lowered their target price by $11 per share. In the company's second quarter earnings information, management reported the company had a tangible book value per share of $48.75, almost double the current market share price.

The company reports next on Oct. 17.



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Banking giant Citigroup (C) has had all of its financial numbers going in the right direction since coming out of the 2007 and 2008 financial crisis. However, the investing public remains wary of Citi and the other money center banks on fears another global financial crisis...
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2011-19-13
 

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