While much can be said of their recent improvements, Citigroup Inc. (NYSE:C) is far from being as green or as pretty as it was looking back in 2007. At that time, Mr. Market had this mega bank's share price hovering around $500 per share, a stark difference from its current price of $42.46 p/s.
All bad news aside, Citi has made major strides at reducing risks and covering litigation losses and the market has acknowledged this; shares currently sell at 70% more than yearly lows. Due to a slight downturn, it's a good time to reassess Citi's valuation to determine whether or not this is a buying opportunity or signs of hard times to come.
Like Bank of America, Citigroup is coming off large litigation and settlement costs associated with it's mortgage loans written between 2004-2008. These costs amounted to approximately $1 Billion Dollars in the fourth quarter of 2012 and $3.7 Billion in full year 2012. Fortunately for Citi shareholders, Citi seems to be a little more out of the woods than those at Bank of America. Regardless, uncertainty from future obligations is and will continue to weigh in heavily on management as stricter regulations are forcing stronger capitalization rates (Basel III).
Fundamentals: (with Bank of America experiencing similar situations it is used for comparison)
EPS: Citi's earnings came in at $2.49 per share compared to Bank of America's $0.25.
P/E: The market is currently valuing Citi at a 16.93 P/E and Bank of America at a much higher 45.20.
P/B: Citi's Price to Book Value is currently at 0.68; BAC's at 0.51.
Long Term Debt to Equity: 1.27 for Citi; 1.16 for Bank of America.
Dividend: Both Companies pay $0.04 per share.
Dividend Ratio: 0.09% for Citi; 0.35% for BAC
Operating Margin: Citi has an operating margin of 11.31%; BAC only has 3.69% to work with.
To some, the current market dip in price could signal a buying opportunity. Compared to BAC, Citi looks fundamentally stronger due to the fact that it is a little farther along in regards to recovering from its litigation wounds. Times are challenging for banks and there is no way to foresee future regulation requirements/implications. Either way, both of these big banks look poised to gain substantial ground on lost share price if they can sort out the messes they are both currently in!
Disclaimer: The author is not a registered investment advisor and does not provide specific investment advice. Data is sourced from Yahoo Finance and company reports. This information is for informational purposes only. As always, please do not invest more than you can afford to lose!
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.