thevoice@voiced...'s  Instablog

• At the end of the second quarter of 2009, the company’s Tier 1 Capital ratio, a key measure of financial strength, was 12.7%, among the highest in the industry.

• Citi’s Tier 1 Common increased by approximately $64 billion following its recent exchange offer. Its Tangible Common Equity (TCE) will increase by approximately $60 billion, resulting in approximately $100 billion of TCE and a Tier 1 Common ratio of over 9%.

• Structural liquidity at the end of the second quarter of 2009 was 71% compared to 55% at the end of the third quarter of 2007.

• Citi has reduced key risk exposures by 37% year over year to approximately $97 billion (e.g. year over year, direct

• sub-prime exposure is down 57% and highly leveraged finance commitments are down 65%); anmore than 50% since the end of 2007.

• Citi has reduced quarterly expenses by 23% since the fourth quarter of 2007 while continuing to invest in innovation and serving customers well.

• Since the beginning of 2007, Citi has worked successfully with approximately 625,000 homeowners to avoid potential foreclosure on combined mortgages totaling more than $67 billion.

• Regional Consumer Banking deposits grew in every region versus the prior quarter, with particular strength in North America, where deposits grew 6%. Total deposits were $805 billion, up 6% sequentially and flat with prior year levels.

• Citi has sold more than 20 businesses since the end of 2007, redirecting its focus on core businesses.

• Since the begginging of 2008, Citi has reduced assets within Citi Holdings by approximately $250 billion.

• Last quarter, Institutional Clients Group had net income of $2.8 billion, up 17% from prior year levels on record net income from Transaction Services and strong results in Securities and Banking.

The optimism that began in March has failed to continue in another major market, the Shanghai. For the month of August, Hong Kong’s index has dropped over 20% after gaining nearly 100% for the year. The Hang Seng has lost nearly 5% for August and it seems as though the US markets are next up for a correction. The recent beat and “meeting earnings estimates” for companies to me is a non-event. The majority of meeting analyst expectations was due to expense reductions and not profits. With consumers bank accounts dwindling the coming months will prove much more difficult once companies realize they can not slash costs further and new sources of growth must emerge. More importantly the rally in China was largely due to the half a trillion stimulus package unleashed, similar to the stimulus package released by the Obama administration. There is no real earnings power driving the rally but sort of a bonus check to citizens that is slowly winding down. The stimulus impact should be over by the beginning of 2010.

Many analysts view a peak formation in the current market. Some expect a 10-20% turnaround from current levels and witnessing the correction overseas, a pullback is not hard to fathom. Although one never wants to bet against a rally, now looks like a great time to begin hedging any gains realized over the past seven months.

Unemployment is still at 10%. Bank failures this year have reached 84, the fastest pace of bank closure in 17 years – reported by Bloomberg. With this in mind lets not forget the wise words of Warren Buffet, “Be fearful when others are greedy, and be greedy when others are fearful.”