Filed Under: ,
Tickers in this Article: C, JPM, BAC, WFC, MS
Citigroup (NYSE:C) has been bathed in losses throughout the severe economic downturn. It posted a fourth quarter loss of 33 cents per share, or $7.6 billion, due largely to the $20 billion TARP repayment. Without the $6.2 billion repayment charge, Citi's losses would have been $1.4 billion, or 6 cents per share. We'll look at how Citi stacks up against its banking brethren. (Read more about TARP in Will Tarp Fix The Financial System? )

IN PICTURES:
Digging Out Of Debt In 8 Steps

The Bar Is Set Low For Citi
The market shrugged off the recent report as being in line with expectations. Despite the loss, the outlook is undeniably better than last year's Q4, which featured $17.3 billion in losses and a staggering $27.7 billion loss for the year. The question is, does less bad necessarily mean good? Citi nowadays versus Citi of the past year looks better, but how could it not? Compared it to its peers, however, Citi is not doing very well.

JP Morgan Chase (NYSE:JPM) recently reported earnings, posting a quarterly profit of $3.3 billion. The market was disappointed, though, with the quality of the earnings report and its direction. The investment and asset management segments racked up huge gains, but the credit and commercial sides were off. This is leading to macro-questions about when the bank's traditional lending revenues will improve. It seems as though JP Morgan took the brunt of the market's concerns about financials and the economy, whereas Citi got a free pass or perhaps just a shrug.

It's Not Just JP Morgan
Other large banks besides JP Morgan Chase, even those heavily damaged by the severe economy, are coming back better than Citi. Bank of America (NYSE:BAC), which had tremendous problems of its own and has suffered extensive losses, still has better forward prospects (or at least less discouraging ones) than Citi by almost any consensus.

An important consideration for investors is Citi's over-arching problems beyond a single quarterly report. There is the recent share dilution to 28.3 billion shares up from 22.9 billion, and yet the government still owns 25% of Citi. Then there is Citi Holdings, the dumping ground for so-called troubled assets which began with $900 billion worth of assets. Though it has sold $351 billion of these to date, the subsidiary still accounts for losses of $2.4 billion this quarter. Foreign investors like Kuwait sold their stake in the bank, and even one of its biggest boosters, Saudi Prince Alwaleed Bin Talal, has been critical of Citi. And if management means anything, would you rather have Jamie Dimon or Vikram Pandit running a bank you invest in?

Other Peers Even Better
In a recent analyst's note on Wells Fargo (NYSE:WFC), there was talk about growth prospects rather than lessening losses. Wells Fargo's healthy prospects put it in a completely different position than Citi. The new and near term leader of the big banks, though, may be Morgan Stanley (NYSE:MS). Despite the street's unhappy take on its latest earnings report, Morgan Stanley has a solid investment banking business and strong forward prospects.

Citi's Prospects: Is It An Investment?
Beneath even the poor earnings of Citi, there is the question of the direction of the company. Analyst Christopher Whalen of Institutional Risk Analytics feels the stock is not a value stock, but a speculative play. And why not? Both Citi's recent history and its business prospects going forward are not healthy. Whalen pointed out Citi needs a massive amount of revenue just to stay afloat. Other larger banks are recovering better, and this does not even consider the mid-size and smaller banks. Whalen said Citi is, "not out of the woods yet." Investors who've paid attention aren't surprised at all. While there may be good value buys in banking stocks, Citi is not one of them.

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

comments powered by Disqus

Trading Center