Citigroup Still a Sell

Jul.19.11 | About: Citigroup Inc. (C)
Last week’s earnings report sent shares of Citigroup (NYSE:C) up 3%, but the rally was short-lived and rightly so. The seemingly impressive numbers, at a closer glance, were tempered by an unimpressive reality.
Net income rose 24% in the second quarter, but that was as loan loss provisions declined (those loan loss reserves comprised two-thirds of profits, according to MarketWatch). And the problem is that’s a source that will evaporate. Revenue rose 5% over the first quarter, but on an annual basis revenue fell 7%; expenses rose 7%, year-on-year. And at Citicorp -- the division Citigroup is working to grow -- revenue fell moderately, by less than 1%.
But we don’t need an earnings report to know that Citigroup is not a buy. The stock is down 19% year-to-date, and is a long-term sell. And while shares were somewhat overpunished last week as the market reacted to the details of the earnings report, I would not consider that a buying opportunity.
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Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.