Citigroup, Inc. (NYSE: C): Q2 Earnings Preview 2011

Citigroup, Inc. (NYSE: C) is scheduled to release second-quarter financial results before the market open on Friday, July 15, 2011. Analysts, on average, expect the company to report earnings of 97 cents per share on revenue of $19.94 billion. In the year-ago quarter, the company reported earnings of 90 cents per share on revenue of $25.42 billion.

Citigroup, Inc., a global financial services company, provides consumers, corporations, governments, and institutions with a range of financial products and services, including consumer banking, credit cards, corporate and investment banking, securities brokerage, and wealth management. In 2010, Citigroup recorded its first full-year profit since the crisis began — and untangled most of its remaining ties with Washington.

The bank, which struggled amid mounting losses on credit cards and mortgages, has been selling some of its assets from its Citi Holdings unit. Meanwhile, Citigroup’s core business is progressing well and the international business is gaining momentum. Citi’s performance has been overall stable in the trailing five quarters. 

In the preceding first quarter, the New York-based company’s net income was $3 billion, or 10 cents per share, compared to $4.43 billion, or 15 cents a share, in the year-ago period. Revenue totaled $19.7 billion, down from the year-earlier $25.4 billion. Analysts, on average, expected the company to report earnings of 9 cents per share on revenue of $20.55 billion.

All big US banks have returned to profitability amid easing loan losses. Lending is slowly picking up. The job market is slowly but steadily improving, which should lead to better credit quality for consumer loans.Even dividend increases have resumed at some institutions.

Recent comments by the management suggest that Citi has turned the corner. In May, the bank reinstated a one-cent quarterly dividend and also engineered a reverse split to lift its stock out of the single digits. Increasing the share price tenfold, even if it is cosmetic, leads individual shareholders to take another look at Citigroup’s stock, and make it easier to buy for institutional investors that have restrictions on owning shares priced under $5. It would also restore Citigroup’s place among the companies that make up indexes like the Dow Jones industrial average, which banished it once the stock started to fall. Citi will begin to pay a dividend of a penny per share in the second quarter, its first dividend since 2009. Citigroup is not expected to be able to buy back stock until 2012 at the earliest, because its financial condition remains weaker.

However, trading revenue remains a wild card. Like many rivals, Citigroup is struggling to boost revenue. A volatile trading environment has depressed investment banking profit and an uncertain economy is shrinking consumer lending.

Citigroup has a global footprint with operations in over 160 countries and jurisdictions, helping corporate clients and consumers with their local and global needs. The company’s significant presence in the emerging markets enables it to offer clients access, exposure and insight into the highest growth areas of the world.

Citigroup’s core business, Citicorp, remains very attractive and its unique franchise allows clients to access high growth foreign markets. The segment has reported consistent revenues, despite the financial turmoil in the past two years. Going forward, the company looks forward to capitalizing on the enormous strength of this franchise, once the ongoing deleveraging is accomplished.

Full Disclosure: None.

Wall Street Ends Higher As Dollar Drops, Citigroup (NYSE: C) Gains

US stocks finished higher on Thursday as as investors shrugged of a series of mixed earnings reports as well as disappointing economic news.

The Dow Jones Industrial Average rose 72.35 points, or 0.57%, to finish at 12,763.31. The S&P 500 added 4.82 points, or 0.36%, to close at 1,360.48. The Nasdaq Composite climbed 2.65 points, or 0.09%, to 2,872.3.

The Commerce Department reported Thursday that real gross domestic product rose at a 1.8% annualized rate in the first quarter, down from a 3.1% increase in the fourth quarter. 

A release by Department of Labor on Thursday showed that number of Americans filing first- time claims for unemployment benefits rose 25,000 to 429,000 in the week ending April 23. Economists expected jobless claims to drop to 395,000. The four-week average of seasonally adjusted initial jobless claims, a less volatile gauge, increased 9,250 to 408,500. Continuing claims for the week ending April 16 fell 68,000 to 3.64 million.

Exxon Mobil Corp. (NYSE: XOM) said Thursday that its first-quarter profit jumped 69% to  $10.65 billion, or $2.14 a share, from $6.3 billion, or $1.33 a share, in the year-earlier quarter. Revenue climbed to $114 billion from $90.3 billion. Analysts, on average, expected the company to report earnings of $2.04 a share on revenue of $112.6 billion. Shares of Exxon-Mobil fell 44 cents, or 0.50%, to close at $87.34.

Procter & Gamble Co. (NYSE: PG) said Thursday that its third-quarter profit climbed to $2.87 billion, or 96 cents a share, from $2.59 billion, or 83 cents a share, in the year-ago quarter.The company said its core earnings rose 8% to 96 cents a share. Revenue grew 5% to $20.23 billion. Analysts, on average, expected the company to report earnings of 97 cents a share on revenue of $20.24 billion. Shares of the consumer products giant rose 48 cents, or 0.75%, to $64.50.

Sprint Nextel (NYSE: S) reported Thursday that its first-quarter loss narrowed to $439 million, or 15 cents a share, from $865 million, or 29 cents, in the year-ago quarter. Revenue climbed to $8.31 billion from $8.09 billion. Analysts, on average, expected the company to report a loss of 22 cents a share on revenue of $8.2 billion. Shares of Sprint Nextel soared 32 cents, or 6.68%, to $5.11. 

Shares of Citigroup (NYSE: C) rallied 6 cents, or 1.77%, to close at $4.59.

European stocks closed up. The UK FTSE rose 1.74 points, or 0.03% to 6,069.60. The German DAX and French CAC increased 0.95% and 0.91% respectively.

Asian stocks finished mixed. The Nikkei 225 rose 157.90 points, or 1.63%, to 9,849.74. The Hang Seng index of Hong Kong declined 87.21 points, or 0.36%, to 23,805.63.

Full Disclosure: None.

Citigroup, Inc. (NYSE: C): Q1 Earnings Preview 2011

Citigroup, Inc. (NYSE: C) is scheduled to release first-quarter financial results before the market open on Monday, April 18, 2011. Analysts, on average, expect the company to report earnings of 9 cents per share on revenue of $20.55 billion. In the year-ago quarter, the company reported earnings of 15 cents per share on revenue of $25.42 billion.

Citigroup, Inc., a global financial services company, provides consumers, corporations, governments, and institutions with a range of financial products and services, including consumer banking, credit cards, corporate and investment banking, securities brokerage, and wealth management. In 2010, Citigroup recorded its first full-year profit since the crisis began — and untangled most of its remaining ties with Washington.

The bank, which struggled amid mounting losses on credit cards and mortgages, has been selling some of its assets from its Citi Holdings unit. Today, the pile of assets that Citi plans to sell or divest is down to $359 billion, less than half of its peak of $827 billion in early 2008. Meanwhile, Citigroup’s core business is progressing well and the international business is gaining momentum. 

In the preceding fourth quarter, the New York-based company’s net income was $1.31 billion, or $0.04 per share, compared to a net loss of $7.58 billion, or $0.33 per share in the previous year. Total revenues, net of interest expense, increased to $18.37 billion from last year's $5.41 billion and included negative credit value adjustments, or CVA, of $1.1 billion. Excluding CVA, revenues for the quarter were $19.5 billion. Analysts, on average, expected the company to report earnings of 8 cents per share on revenue of $20.58 billion.

All big US banks have returned to profitability amid easing loan losses. Lending is slowly picking up. The job market is slowly but steadily improving, which should lead to better credit quality for consumer loans.Even dividend increases have resumed at some institutions.

Recent comments by the management suggest that Citi has turned the corner. Last month, the bank announced that it would reinstate a one-cent quarterly dividend and engineer a reverse split to lift its stock out of the single digits. Increasing the share price tenfold, even if it is cosmetic, could lead individual shareholders to take another look at Citigroup’s stock, and make it easier to buy for institutional investors that have restrictions on owning shares priced under $5. It could also restore Citigroup’s place among the companies that make up indexes like the Dow Jones industrial average, which banished it once the stock started to fall. Citi will begin to pay a dividend of a penny per share in the second quarter, its first dividend since 2009. Citigroup is not expected to be able to buy back stock until 2012 at the earliest, because its financial condition remains weaker. Citi expects the split to take place after trading has closed on May 6, 2011. “Citi is a fundamentally different company than it was three years ago,” said CEO Vikram Pandit. “The reverse stock split and intention to reinstate a dividend are important steps as we anticipate returning capital to shareholders starting next year.”

However, trading revenue remains a wild card. According to industry experts, first quarter results at big banks will likely be held back by weak trading and investment banking results, as the stock market sagged on Middle Eastern political upheaval, a Japanese earthquake and tsunami sent the yen to record highs and markets were broadly unpredictable.

Recently, the company said that it plans to offer least 12 million shares of Primerica Inc., the life-insurance business it took public about a year ago. The company will receive all of the net proceeds from the offering. The shares are currently held by a Citigroup subsidiary.

The company's stock currently trades at a forward P/E (fye Dec 31, 2012) of 8.47. In terms of stock performance, Citigroup shares have lost nearly 4 percent since the beginning of the year.

Full Disclosure: None.

Citigroup Rallies In Pre-Market Trading

Shares of Citigroup (NYSE: C) rallied more than 3% in pre-market trading Monday after it announced a 1-for-10 reverse stock split of Citigroup common stock. Citi also announced that it intends to reinstate a quarterly dividend of $0.01 per common share in the second quarter of 2011, following the effective date of the reverse stock split. Citi anticipates the reverse stock split will be effective after the close of trading on May 6, 2011, and that Citi common stock will begin trading on a split adjusted basis on the New York Stock Exchange (NYSE) at the opening of trading on May 9, 2011. When the reverse stock split becomes effective, every ten shares of issued and outstanding Citigroup common stock will be automatically combined into one issued and outstanding share of common stock without any change in the par value per share. This will reduce the number of outstanding shares of Citigroup common stock from approximately 29 billion to approximately 2.9 billion. "Citi is a fundamentally different company than it was three years ago," said Vikram Pandit, Chief Executive Officer of Citigroup. "The reverse stock split and intention to reinstate a dividend are important steps as we anticipate returning capital to shareholders starting next year."

Full Disclosure: None.

Citigroup (NYSE: C): Q4 Earnings Preview 2010

Citigroup, Inc. (NYSE: C) is scheduled to release fourth-quarter earnings before the market open on Tuesday, January 18, 2011. Analysts, on average, expect the company to report earnings of 8 cents per share on revenue of $20.58 billion. In the year-ago period, the company posted a loss of 33 cents per share on revenue of $5.40 billion.

Citigroup, Inc., a global financial services company, provides consumers, corporations, governments, and institutions with a range of financial products and services, including consumer banking, credit cards, corporate and investment banking, securities brokerage, and wealth management.

In the preceding third quarter, the New York-based company's net income was $2.2 billion, or 7 cents per share, compared to a loss of $3.24 billion, or 27 cents per share, in the prior-year quarter. Income from continuing operations, which excludes an $800 million pre-tax ($435 million after-tax) loss on the previously-announced sale of The Student Loan Corporation, was $2.6 billion or 8 cents per share in the third quarter 2010. Revenue dropped 10% to $20.7 billion from $23.1 billion in the same quarter last year.

Early in December, the Treasury Department sold its remaining shares in the Citigroup, ending a long and difficult chapter for the bank after it received $45 billion in three government bailouts during the financial crisis. Treasury's departure would finally free Citi from the shackles of government control which in turn would help the management to focus better on inducting strategic initiatives to improve its profitability in the upcoming years. The exit of the government from Citi shares will lead to increased institutional ownership, another positive for the bank stock. Part of the institutional take is that more equity indexes will be buying Citi shares with the government out of the picture, meaning more fund managers holding Citi shares. The removal of the government overhang on Citigroup shares could free up the bank to pay a dividend or buyback shares.

The bank, which struggled amid mounting losses on credit cards and mortgages, has been selling some of its assets from its Citi Holdings unit. In November, Citi sold a $1.4 billion real estate loan portfolio to OneWest bank, helping it shrink Citi Holdings to less than 20 percent of Citi's total balance sheet. Citigroup recently announced that on December 31, 2010, it had completed transactions with Discover Financial Services and SLM Corporation that resulted in the divestiture of its student loan business, The Student Loan Corporation. The sales reduce non-core assets in Citi Holdings by approximately $31 billion and combined with other divestitures in the quarter are expected to bring Citi Holdings assets to less than 20 percent of Citi's total balance sheet as of the end of the fourth quarter 2010. Citi Holdings will continue to pursue economically rational divestiture opportunities that are in the best interest of shareholders. As part of the transactions, Citibank, N.A. purchased approximately $8.7 billion of assets from SLC and will explore opportunities to reduce these assets over time.

Meanwhile, Citigroup’s core business is progressing well and the international business is gaining momentum. Its wholly-owned subsidiary, Credicard, signed a binding agreement with U.S. Bancorp’s (USB) wholly-owned subsidiary, Elavon, in order to form a joint venture form a merchant services company offering payment solutions in Brazil.

In terms of stock performance, Citigroup shares have gained nearly 40 percent over the past year.

Full Disclosure: None.

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.

Full Disclosure: None.

Citigroup Inc. (NYSE: C): Back To Its Old Ways?

It appears that the pain of the recession is not deep enough to teach Citigroup Inc. (NYSE: C) what it needs to learn. The bank, which had to sell off non core assets and slim down in the wake of the financial crisis, is now readying a new unregulated insurance credit derivative, the CLX. Basically, the CLX is systemic risk insurance that will pay out in the event of a financial crisis. The basic premise is to allow investors to hedge against a spike in funding costs.

The company is heading back into familiar territory where they’re putting taxholder money into play on another risky bet. Simply put the instrument will enable it to gamble on future events by issuing complex financial instruments which attempt to quantify risk. This is very similar to the original business that Citigroup was heavily involved with that precipitated their fall from glory.

Citi says regulators have been given CLX for consideration. So far, they haven't passed judgment.

As expected, the bank was quick to deny that it's putting taxpayers at risk. Rather, it might have the opposite effect: for example strengthening an insurer when borrowing costs soar.

However, it is difficult to buy Citigroup's claim. As Cambridge Professor Chris Rogers puts it, “This is basically a kind of insurance product. The main issue is: how good is the party issuing it? If it’s going to be paying out huge numbers in the event of a crisis, will it be able to meet obligations? Insurers can buy reinsurance for their liabilities, but the buck has to stop somewhere—there’s a limit to how much a private insurer can pay out. Only the government can cover unlimited losses.”

Undoubtedly, Citigroup's latest move seem to heavily depend on the perception that public memory is short.

All this talk about CLX raises the obvious question: Who stands to lose most if this unique yet complicated scheme crashes one fine morning? No prizes for guessing the right answer!

Full Disclosure: None.

Wells Fargo & Co. (NYSE: WFC): Q4 Earnings Preview 2009

Wells Fargo & Company (NYSE: WFC), the nation's fourth-largest bank, is scheduled to release financial results for the fourth quarter before the market open on Wednesday, January 20, 2010. Analysts, on average, expect the company to report net loss of 2 cents per share on revenue of $21.92 billion. In the year ago quarter, the company reported a loss of 79 cents per share on revenue of $9.82 billion.

Wells Fargo & Company, through its subsidiaries, provides retail, commercial, and corporate banking services principally in the United States. The company operates through three segments: Community Banking, Wholesale Banking, and Wells Fargo Financial.

In October, the financial services provider posted higher profit for the third quarter, thanks to its Wachovia acquistion that more than doubled revenues. The San Francisco, California-based company's net income applicable to common stock was $2.64 billion, compared to $1.64 billion in the prior-year quarter. On a per share basis, earnings grew 14% to $0.56 from $0.49 in the year-earlier period. Quarterly revenue totaled $22.5 billion, up from the previous year's revenue of $10.4 billion. Analysts, on average, expected the company to report earnings of $0.33 per share on revenue of $21.63 billion.

Provision for credit loss during the quarter increased to $6.11 billion from $2.49 billion reported in the comparable quarter of the previous year. Third quarter net loan charge-offs were $5.1 billion, compared to $1.9 billion in the corresponding quarter of the previous year. The allowance for credit losses, including the reserve for unfunded commitments, totaled $24.5 billion, higher than the previous year's allowance for credit losses of $8.03 billion.

The company expects credit costs to remain elevated in the fourth quarter, given the continuing economic challenges. However, based on portfolio trends and its current economic outlook, and assuming no unexpected further deterioration in the economy, the company believes consumer loan losses will peak in the first half of 2010 then gradually decline, while commercial and commercial real estate loan losses will peak in the second half of 2010 and then gradually decline. Further, Wells Fargo expects nonperforming assets or NPAs to continue to increase in the near term, but at a slower pace as credit deterioration slows. NPAs are expected to remain elevated through 2010.

Late in December, Wells Fargo & Co. (NYSE: WFC) repaid the $25 billion it received from the government in bailout money. The company sold 489.9 million shares of common stock at $25.00 per share for a total of $12.25 billion in a common stock offering completed December 18. Net proceeds of this common stock offering and excess liquidity were used to repay the $25 billion TARP investment and accrued dividends. The company said that, by repaying the TARP investment, it will eliminate $1.25 billion in future annual preferred stock dividends.

Wells Fargo's Tier 1 Common ratio, a key measure of financial strength, is 6.2% after TARP repayment and analysts believe it will continue to rise next year. However, Wells' Tier 1 ratio is below that of the other banks that have exited TARP. The Tier 1 ratio of Bank of America (NYSE: BAC) and Citigroup (NYSE: C) after TARP repayment stand at 8.5% and 9%, respectively. By fourth quarter 2010, Bernstein analyst John McDonald believes Wells Fargo will have a Tier 1 Common ratio of 7.9%, compared to Citi at 8.7% and Bank of America at 9.2%.

Although the share issuance will likely dilute earnings per share, experts believe that the step is mildly positive for the stock. In the immediate term, the TARP repayment will reduce the fourth-quarter earnings by $2 billion due one-time hit the bank will incur from repurchasing TARP preferred stock. Offsetting those concerns, however, analysts said their worries over Wells Fargo's balance sheet, TARP-related government interference into the business, and the size of its TARP repayment have been eased.

Among other developments, Wells Fargo said in December that it has agreed to buy Prudential Financial Inc.'s (NYSE: PRU) minority stake in their retail brokerage joint venture for $4.5 billion in cash.

The company's stock currently trades at a forward P/E (fye 31-Dec-10) of 26.71 and PEG ratio (5 yr expected) of 1.39. In terms of stock performance, Wells Fargo shares have gained nearly 21% since the beginning of the year.

Full Disclosure: None

Citigroup Inc. (NYSE: C): Q4 Earnings Preview 2009

Citigroup Inc. (NYSE: C) is scheduled to release financial results for fourth quarter before the market open on Tuesday, January 19, 2010. Analysts, on average, expect the company to report net loss of 33 cents a share on revenue of $19.28 billion. In the year ago quarter, the company reported a loss of $2.44 per share on revenue of $5.60 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. The company is in midst of a massive restructuring effort and has sold over $100 billion in assets over the last four quarters. It has two primary business divisions- Citicorp and Citi Holdings. While Citicorp acts as a traditional bank, Citi Holdings manages riskier assets, which the firm will try to sell to raise cash.

In October, the financial services company posted net profit for the third quarter compared to a loss last year. The company swung to a third-quarter net profit of $101 million, compared to a net loss of $2.815 billion in the prior-year quarter. However, net loss available to common shareholders widened to $3.242 billion from last year's $2.934 billion. On a per share basis, loss narrowed to $0.27 from $0.61 in the previous year. Revenue rose to $20.39 billion from $16.26 billion. Analysts, on average, had projected a loss of $0.38 per share for the quarter. The results included $8 billion in net credit losses and an $802 million net loan loss reserve build.

In the third quarter, Citi Holdings assets were reduced by $32 billion and were down $281 billion from the peak levels in the first quarter of 2008. Assets in special asset pool were reduced by $19 billion in the third quarter, primarily through sales, which were executed at or near our marks.

During a conference call with analysts in October, CEO Vikram Pandit said that the consumer credit environment remains challenging in the US and that it will continue to impact the company's near-term results.

Last month, Citigroup repaid $20 billion of a total of $45 billion fund it received from the U.S. government's TARP Program by repurchasing $20 billion in preferred securities it issued to the Treasury Department in exchange for the aid. In order to repay the $20 billion, Citi issued $20.5 billion of capital and debt, comprising $17 billion of common stock, with an over-allotment option of $2.55 billion, and $3.5 billion of tangible equity units, consisting of about $2.8 billion of prepaid common stock purchase contracts and about $0.7 billion of subordinated notes. Additionally, the company also terminated the $1.8 billion of the $7.1 billion loss-sharing agreement with the Treasury.Citigroup received $45 billion under the Troubled Asset Relief Program, $25 billion of which was converted into common stock. It is expected that within the year, the government could sell off its remaining 34 percent common share stake in the company.

It is very difficult to ignore the fact that the company's capital-raising efforts would definitely reduce the company's earnings power due to the massive shareholder dilution. Also, the surprisingly low pricing of thestock offer this week provided a clear sign that investors are still nervous about the banking giant's ability to regain its financial health.

Citi on the other hand has said that it would benefit from the the repayment and the termination of loss-share agreement, through a net reduction in annual interest expense of about $1.7 billion and about $0.5 billion in lower annual amortization expense associated with the loss-sharing agreement. However, it would result in a pretax loss of some eight billion dollars. The end of the state guarantee will result a loss of 2.1 billion dollars, offset in part by annual savings of 500 million dollars. The repayment also freed the bank from government restrictions on pay and operations that were imposed on companies receiving exceptional assistance from the $700 billion bailout fund.

Upon the completion of the TARP aid, Citi's pro forma Tier 1 capital ratio at the end of the third quarter of 2009 would have been 11.0%, compared with 12.8%. The company's pro forma Tier 1 common ratio at the end of the third quarter would have been 9.0%, compared with 9.1%.

Among other developments, early this month, Citigroup agreed to sell its foreign exchange trading platform LavaFX to FXall, another rival electronic trading platform for foreign exchange, for an undisclosed sum. The sale is being seen as a part of it restructuring strategy that includes de-leveraging some of its assets through a number of steps that include joint ventures, dispositions and asset runoffs.

In retrospective, although Citigroup's capital levels are higher than other banks, its assets are riskier. Meanwhile, loan losses have continued to pile up. Moreover, fears over the possibility of a double-dip recession and concerns over massive dilution may continue to weigh on stock for some time to come. The company's stock currently trades at a forward P/E (fye 31-Dec-10) of 52.3. In terms of stock performance, Citi shares have gained 52 percent over the past year.

Full Disclosure: No Positions.