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Summary

  • The company reported earnings and revenue which beat analyst expectations.
  • Net credit losses declined quite a bit from the prior year.
  • Earnings per share increased 59% from the prior quarter.

The last time I wrote about Citigroup Inc (NYSE:C), I stated:

"Due to the excellent valuations, high earnings growth expectations, and near oversold technicals I will be pulling the trigger on this name around these prices."

Since that article was published the stock is up 0.89% while the S&P 500 (NYSEARCA:SPY) has dropped 1.44%. Citi 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 14Apr14 and on the surface all the results were good with the company reporting earnings of $1.30 per share (beating estimates by $0.15) on revenue of $20.1 billion (beating estimates by $730 million). What I'd like to do at this time is delve into the weeds and pick out some highlights from different portions of the report to see if the stock is worth buying at the present time.

Global Consumer Banking

Global Consumer Banking

1Q14

4Q13

1Q13

Q/Q

Y/Y

Total Revenue

$ 9,293

$ 9,474

$ 9,746

-2%

-5%

Provision for credit losses

$ 1,618

$ 1,830

$ 1,647

-12%

-2%

Operating expense

$ 5,190

$ 5,220

$ 5,352

-1%

-3%

Net income

$ 1,719

$ 1,632

$ 1,820

5%

-6%

Global Consumer Banking is the part of the business which serves more than 100 million clients in 40 countries and consists of five divisions: Citibank, Citi Branded Cards, Citi Retail Services, Citi Commercial Bank, and CitiMortgage. This portion of the business accounts for approximately 46.5% of total revenues. 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 and continued spread compression globally.

Institutional Clients Group

Institutional Clients Group

1Q14

4Q13

1Q13

Q/Q

Y/Y

Total Revenue

$ 9,234

$ 7,044

$ 9,591

31%

-4%

Provision for credit losses

$ 27

$ (96)

$ 65

128%

-58%

Operating expense

$ 4,994

$ 5,245

$ 5,079

-5%

-2%

Net income

$ 2,943

$ 1,785

$ 3,212

65%

-8%

This part of the business offers investment and corporate banking services and products for corporates, governments, institutions, and ultra-high-net-worth investors operating in four divisions: Citi Markets, Citi Corporate & Investment Banking, Citi Private Bank, and Citi Transaction Services. What I notice most about this division of the company is that provision for credit losses decreased 58% from the prior year.

Citi Holdings

Citi Holdings

1Q14

4Q13

1Q13

Q/Q

Y/Y

Total Revenue

$ 1,456

$ 1,297

$ 905

12%

61%

Provision for credit losses

$ 329

$ 338

$ 747

-3%

-56%

Operating expense

$ 1,544

$ 1,471

$ 1,517

5%

2%

Net income

$ (292)

$ (422)

$ (798)

-31%

-63%

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. The main purpose for revenue increasing dramatically was because of the absence of repurchasing reserve builds for representation and warranty claims during the quarter.

Conclusion

Citigroup Inc.

1Q14

4Q13

1Q13

Q/Q

Y/Y

Total Revenue

$ 19,983

$ 17,815

$ 20,242

12%

-1%

Provision for credit losses

$ 1,974

$ 2,072

$ 2,459

-5%

-20%

Operating expense

$ 11,728

$ 11,936

$ 11,948

-2%

-2%

Net income

$ 4,370

$ 2,995

$ 4,234

46%

3%

Earnings Per Share

$ 1.30

$ 0.82

$ 0.69

59%

88%

The decrease in provision for credit losses for the company as a whole was at 20%, which is a great thing I believe. What I like is that earnings per share increased 88% from the prior year and 59% from the prior quarter.

Personally I don't like that total revenue for the company decreased 1% from last year but this seems to be a step in the right direction as the company increased revenues from last quarter amid the emerging market meltdown experienced in the first quarter this year. Citi's share price was down 11.64% from the prior earnings release excluding dividends.

The results of this quarter were obviously outstanding as was evidenced in the share price of the stock, jumping 4.36% after reporting. The earnings increase was pretty good, but I loathe decreased revenues. I will give this quarter a pass on the decreased revenues because it was only a 1% decline from last year. Hopefully with one more quarter of good results we can get a dividend increase as the Fed sees that the quality of the company's book is good. This was a decent quarter for the company and I'll continue to purchase small batches of it for my dividend portfolio as I see fit till the next earnings call.

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: Will A Citi Dividend Surprise Come Shortly After The Earnings Surprise?