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Citigroup Inc. (C) is a global diversified financial services holding company whose businesses provide consumers, corporations, governments and institutions with a broad range of financial products and services which include consumer banking and credit, corporate and investment banking, securities brokerage and wealth management. The company reported earnings before the market opened on 16Jan14 and on the surface everything didn't look so hot with the company reporting fourth quarter earnings of $0.82 per share (missing analysts' estimates by $0.17) on revenue of $17.9 billion (also missing analysts' estimates by $0.85 billion). What I'd like to at this time is delve into the weeds and pick out some highlights from different segments of the company to see if the stock is worth buying at the present time.

Global Consumer Banking

Global Consumer Banking

4Q13

4Q12

Y/Y

Total Revenue

$ 9,474

$ 9,977

-5%

Provision for credit losses

$ 1,830

$ 1,851

-1%

Operating expense

$ 5,220

$ 5,416

-4%

Net income

$ 1,632

$ 1,717

-5%

Global Consumer Banking is among the largest retail banks in the world. From my perspective there was nothing glaring about this segment, but the company did state that revenues were lower due to severe mortgage refinancing inactivity.

Securities and Banking

Securities and Banking

4Q13

4Q12

Y/Y

Total Revenue

$ 4,450

$ 4,362

2%

Provision for credit losses

$ (106)

$ 78

-236%

Operating expense

$ 3,377

$ 3,431

-2%

Net income

$ 960

$ 679

41%

Securities and Banking offers a plethora of investment and corporate banking services and products for corporations, governments, institutions and high-net-worth investors. The most eye-popping thing I saw in this segment was that provision for credit losses decreased by an astounding 236% and the 41% increase in net income. There was a $237 million repositioning charge in 2012 which capped net income to $679, otherwise net income would have declined by about 8% versus 2012.

Transaction Services

Transaction Services

4Q13

4Q12

Y/Y

Total Revenue

$ 2,609

$ 2,617

0%

Provision for credit losses

$ 10

$ 6

67%

Operating expense

$ 1,440

$ 1,501

-4%

Net income

$ 778

$ 787

-1%

This segment of the company provides cash management, trade and securities services to companies, governments and other institutions globally. The main thing to note in this segment was the 67% increase in provision for credit losses.

Citi Holdings

Citi Holdings

4Q13

4Q12

Y/Y

Total Revenue

$ 1,297

$ 1,067

22%

Provision for credit losses

$ 338

$ 1,178

-71%

Operating expense

$ 1,471

$ 1,527

-4%

Net income

$ (422)

$ (1,049)

-60%

Citi Holdings consists of Citi businesses that Citi wants to sell and are not considered part of Citi's core businesses, mainly U.S. mortgages. Line by line we see that total revenue increased 22% due in large part to not repurchasing reserve builds for representation and warranty claims. Provision for credit losses were less by 71% because of a net loan loss reserve release of $540 million when compared to a net reserve build of $51 million back in 2012. The last thing to note is the 60% drop in net income.

Conclusion

Citigroup

4Q13

4Q12

Y/Y

Total Revenue

$ 17,830

$ 18,023

-1%

Provision for credit losses

$ 2,072

$ 3,113

-33%

Operating expense

$ 11,508

$ 11,875

-3%

Net income

$ 2,948

$ 2,134

38%

EPS

$ 0.82

$ 0.69

19%

Shares Outstanding (millions)

3,029

3,029

0%

Tangible Book Value

$ 55.38

$ 51.19

8%

The company reported earnings which were 19% higher than a year before on slightly less revenue while the share price was up 33.58% in all of 2013 excluding dividends. The share count has remained constant for the entire year. Another important measurable metric for bank stocks is tangible book value and that value has increased from $51.19 to $55.38 in one year. On a fundamental basis this bank is inexpensive with respect to 2014 earnings but I believe is a victim of super high expectations, I believe the main argument for buying the stock is that it is cheap. If you also believe in the global growth story then you may want in on the company as it is well positioned in Asia, Latin America, and Europe. If you don't like the action in the company then you may want to consider JPMorgan (JPM) as it seems to be firing on all cylinders. I'm long JPMorgan and Citi, and if Citi continues to come in then I will be picking it up.

Disclaimer: This article is meant to serve as a journal for myself as to the rationale of why I bought/sold this stock when I look back on it in the future. These are only my personal opinions and you should do your own homework. Only you are responsible for what you trade and happy investing!

Source: Citigroup Reports Earnings That Miss