Tuesday, April 6, 2010

Citigroup Inc. (NYSE: C): Q1 Earnings Preview 2010

Citigroup Inc., the third-largest U.S. bank by assets, is scheduled to release Q12010 earnings before the opening bell on Monday, April 19, 2010. Analysts, on average, expect the company to report breakeven per share in the first quarter with estimates ranging from a loss of $0.08 to profit of $0.04 per share. Revenues for the quarter are estimated to be $20.98 billion. In the Q12009, Citigroup reported a loss of $0.18 per share on revenue of $24.79 billion.

Citigroup Inc., one of the the hardest hit banks by the credit crisis, is a global financial services company, provides consumers, corporations, governments, and institutions with a range of financial products and services, including consumer banking and credit, corporate and investment banking, securities brokerage, and wealth management.

In the preceding Q42009, the New-York based firm posted narrower loss of $7.579 billion compared to $17.263 billion in the prior year. Net loss available to common shareholders was $7.766 billion, compared to $18.162 billion last year. On a per share basis, fourth-quarter net loss narrowed to $0.33 per share on 24,260 million shares from $3.40 per share on 5,892 million shares in the same period last year. Excluding the $6.2 billion after-tax loss associated with TARP repayment and exiting the loss-sharing agreement, the Q42009 was $1.4 billion or $0.06 per share. Analysts, on average, expected the company to lose 33 cents a share in the quarter.

In January, the company noted that the bank's goal is to generate a return on assets of 1.25% to 1.5% in its core businesses. In managed assets, the company's goal is CAGR of 5%, from last year's assets of $1.38 trillion.

Citigroup is shedding the complex businesses and spinning off assets under Treasury's pressure in order to focus on its core businesses. The company has realigned its businesses into two primary operating unit in January 2009 - Citicorp and Citi Holdings. The bank's balance sheet has shrunk to $1.86 trillion, down about $500 billion, or 21 percent, from its pre-crisis peak. The company managed to slash its troubled assets to $547 billion in the fourth quarter 2009 from $900 billion in the first quarter 2008. The company aimed to transfer about $61 billion of assets from Citi Holdings to Citicorp in the first quarter of fiscal 2010."It is time to shift our focus to the future which is Citicorp," Citigroup CEO Vikram Pandit recently said in a conference. "We are selling 40 percent of the company," Vikram S. Pandit said to the Congressional Oversight Panel, which is monitoring the use of federal bailout money. "We are breaking it up."

Recently, Citigroup raised $320.4 million its initial public offering of its Primerica life insurance business. The IPO did better than expectation suggesting that the company is regaining investor's faith.

Last month, it completed the sale of its Citi Cards portfolio in the UK, part of CitiFinancial Europe, to CCAM, a special purpose vehicle managed by SAV Credit, a UK credit card issuer, and backed by Varde Partners, an investment manager. The transaction, comprising total assets of approximately $1.25 billion, represents the majority of receivables in the portfolio. In February, it agreed to sell the Italian credit card business to Barclays Bank.

At the same time, the company is expanding its core franchise Citicorp to generate long-term profitability and growth. It is also expanding its correspondent lending business, as the U.S. economy begins to recover. Citigroup's head of global prime finance told Bloomberg News that the bank plans to double the size of a team helping pension and government-backed funds manage direct hedge fund investments. Nick Roe said the growth of the consulting team could come together within the next 18 to 24 months.

"It is time to shift our focus to the future which is Citicorp," Citigroup CEO Vikram Pandit recently said in a conference. Pandit said that the bank is "well positioned to return to sustained profitability." He hopes that his company would soon be able to deliver profits of approximately $20 billion. The bank has regained health in past few months- Citigroup's Tier 1 capital ratio, a key measure of capital strength, was 11.7% at the end of 2009, up from about 7% in 2007 and well above regulatory minimums.

Late in March, the US Treasury Department on Monday confirmed that it will sell all of the 7.7 billion shares of the banking giant over the course of this year, depending on market conditions. The US government owns 27 percent of the firm and shares worth around 33 billion US dollars at current market rate. Treasury's departure would finally free Citi from the shackles of government control which in turn would help the management to focus on returning the bank to profitability. It would also remove any fears of big block sales of a large chunk of the government's stake at firesale prices.

In terms of stock performance, Citigroup shares have gained nearly 25 percent since the beginning of the year.

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