Citigroup Inc. (NYSE:C) is a global diversified financial services holding company, serving consumers, corporations, governments and institutions with a broad range of financial products and services.


The company has sailed through another rocky year. Citi posted a decline in revenue for the third and fourth quarter of 2012 in the continuous challenging environment. The results of the fourth quarter indicated several improvements in significant areas. This comprises increased revenues, controlled expenses, stable net interest margin, improved core asset quality, higher capital ratios, and continued reduction in Citi holdings.

Mixed Financials

Citigroup Inc. (NYSE:C) fourth quarter earnings missed the estimates. The revenues came in at $18.66 billion which was down by 4% from the last quarter and less by 8% from the previous year. Net interest margin increased to 2.93%. Citigroup posted net credit loss of $3.1 billion, down by 25%.

The earnings of the Bank reflect the challenging environment and regulatory changes. However, it was able to do well in some areas. The bank reached its target of year end Basel III Tier 1 common ratio. The bank has a liquid balance sheet and high-quality credit portfolio in the core business.

4Q12 $1bn respositioning charge by business

The bank announced plans to to trim more than 11,000 jobs, in seeking to reduce more than 1 billion dollar of its expenses out of its annual expenses. Most of the jobs will be cut from its institutional client group that is around 1,900 jobs and from global consumer banking business, which will see job cuts around 6,200 positions.

Headcount reductions by business


Citigroup Inc. (NYSE:C) is suffering from legal problems, this has undercut its profit, unlike its competitors Well Fargo and JPMorgan Chase & Co. (NYSE:JPM). The $1.3 billion legal bill affected the profit of the bank.

Citi as compared to its rivals like JPMorgan Chase, Wells Fargo & Company (NYSE:WFC) and Bank of America Corp (NYSE:BAC) raised fewer mortgages as compared to the corresponding quarter in the previous year, while other banks increased their mortgage origination.


In the recent past, Citigroup Inc. (NYSE:C) has gone through some abrupt changes. Vikram Pandit was replaced by Michael Corbat as the CEO of the group. Despite all the upheavals, the strategy of Citigroup remains unchanged. The new CEO focuses on simplifying the business model and directing its resources towards the core Citicorp franchisee, reducing Citi holdings in an economically viable manner.

The company followed the strategy of exiting  segments where it felt undersized, and continuing further would be costly. Citigroup followed the most precise approach of measuring its performance in all the geographies and set a time limit for the return on investment it will make.

The strategies can be pointed out as:

  • Upgrade its position as a leading global bank for both individuals and institutions by developing its global network, penetrating the emerging markets, client relationship and product portfolio.

  • Set it to take hold of opportunities provided by current scenarios such as globalization, digitization, urbanization and emerging market consumers.
  • Fulfill its commitment of responsible finance and the basics of banking.
  • Built up on its performance and making Ctigroup more efficient and productive as well as result oriented.
  • Reduce Citi holdings the sooner the possible.

Share repurchase

Earlier this year Citigroup disappointed on the Comprehensive Capital Analysis and Revenue, as it was unable to send back capital to shareholders. It is expected that Citigroup will increase its dividend and also buyback its shares in 2013 after failing to deliver in 2012. Citigroup is expected to redeploy approximately 20%-30% of net income from 2Q13-2Q14.


The Global Consumer bank of the Citigroup operates 4000 branches in 40 countries and approximately 100 million customers access its facilities and products. The Latin America is expected to grow in the Global Consumer Banking Sector. In Latin America, Citigroup has 2,200 branches and is widely present in Mexico and Brazil. The company is seeking to increase its consumer operations in Paraguay and Uruguay and reducing in Brazil.

In North America, strong mortgage refund activity contributed to the revenue growth. Negative impact was seen on retail banking profits due to low interest rates.

In Asia, Citigroup is mainly present in South Korea, Singapore, Japan, Taiwan, Hong Kong, India, and Indonesia. The consumer revenue growth was sluggish in Asia mainly due to headwinds in Korea and Japan. The revenue in Japan was impacted due to declining interest rates and in Korea due to regulatory changes.

Transaction service- continues to give strong signals

The transaction unit of Citigroup operates in approximately 100 countries and has 400 billion deposits and $75 billion in loans in the third quarter of 2012. The group reaped in some benefits due to strong growth in trade finances and looks forward to gain further ground due to difficulties faced by some other competitors.

The transaction service showed the positive operating leverage in the third quarter of 2012.

BASEL III Relaxation- Boon for Citigroup

The Basel committee on January 7, 2013, announced that it will relax some of the conditions governing the Liquidity Coverage Ratio of banks. Liquid Coverage Ratio is the ratio of high-quality asset of a 30 day net cash outflow. As per the unchanged rules, banks needed to maintain a ratio of more than 100%.

According to the new rule, a wider definition of High Quality Liquid asset will come into terms and the cash outflow parameters will be reduced.

While all the banks gained from decision, Citigroup Inc. (NYSE:C)  benefited the maximum from the revision of the rules. Citigroup, unlike most other banks, has disclosed its LCR of 116%, which under the stricter rule fell short of meeting some requirements.

Citigroup will now be able to divert its money to invest in higher return strategies, rather than having to hold or push the deal into liquid assets. Citigroup compared to other competitors such as Bank of America has become more responsive.

According to Buckingham research, the recent change in the Basel III norms may free up approximately $50 billion of cash at Citigroup Inc.


Citigroup has come a long way since it’s down fall (almost) in the sub-prime crisis. The company has made noteworthy progress in restructuring its shattered business, which turned in strengthening the balance sheet with improved asset quality, increased capital adequacy and higher liquidity.

Recently Citigroup, along with 9 other mortgage servicers agreed to pay a total of $ 805 billion to arrive at settlement of U.S. government mandated case-by-case review of the housing crisis foreclosures.

The current headwinds and challenging global environment have undermined the confidence of stakeholders in the market, the prime reason why banks are trading at a discount. Citigroup Inc. (NYSE:C) represents a great opportunity for patient and risk bearing investors.