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Category: Stock Market and CitiGroup
Date: 15 July 2020 Stock Price of CitiGroup (C): $50.51 We take a look at the 2nd quarter earnings report of their 2020 fiscal year of Citigroup one of the biggest financial institutions in the world with revenues of $19.8 billion for the 2nd quarter of their 2020 fiscal year. But provision for credit losses and benefit claims skyrocketed by 277% to $7.9 billion from just over $2 billion a year ago as Covid-19 starts to bite.
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While credit costs weighed down our net income, our overall business performance was strong during the quarter, and we have been able to navigate the COVID-19 pandemic reasonably well."
About Citigroup
Citi, the leading global bank, has approximately 200 million customer accounts and does business in more than 160 countries and jurisdictions. Citi provides consumers, corporations, governments and institutions with a broad range of financial products and services, including consumer banking and credit, corporate and investment banking, securities brokerage, transaction services, and wealth management.
Overview of Citigroup's 2nd quarter 2020 earnings report
Data below refers to the latest quarterly data unless specified otherwise:
- Revenue: $19.766 billion (up from $17.758billion for the same period of the previous year)
- Revenues increased by 5% over the last 12 months
- Operating costs and expenses : $10.415 billion (down from $10.500 billion for the same period of the previous year)
- Operating costs and expenses decreased by -1% over the last 12 months
- Net income: $1.316 billion (down from $4.799 billion for the same period of the previous year)
- Diluted earnings per share: $0.50 (down from $1.95 for the same period of the previous year)
- PE ratio of Citigroup: 25.2
- Diluted weighted-average shares outstanding: 2.084 billion (down from 2.289 billion for the same period of the previous year)
- Book value per share: $84.41 (up 5% from $79.40 for the same period of the previous year)
- Cash and cash equivalents: $22.889 billion
- Cash and cash equivalents per share: $10.98
- Cash and cash equivalents makes up 21.8% of Citigroup's market capital
- Cash and cash equivalents makes up 1.05% of Citigroup's total assets
- Loans net of allowances for losses: $658.9 billion
- Loans net of allowances makes up 29.5% of Citigroup's total assets
- Goodwill: $21.399 billion
- Goodwill makes up 0.9% of Citigroup's total assets
- Goodwill per stock: $10.26
- Stockholders equity in Citigroup: $173.642 billion
- Stockholders equity per share: $83.3
- So Citigroup is trading a 0.602 times its stockholders equity which is well outside the expected range of between 2 and 4 which most firms tend to trade at.
- For some perspective the average price to book value of firms in the S&P 500 is 3.7 times
Citigroup's management commentary on their 2nd quarter 2020 earnings report
New York – Citigroup Inc. today reported net income for the second quarter 2020 of $1.3 billion, or $0.50 per diluted share, on revenues of $19.8 billion. This compared to net income of $4.8 billion, or $1.95 per diluted share, on revenues of $18.8 billion for the second quarter 2019.
Michael Corbat, Citi CEO, said, “While credit costs weighed down our net income, our overall business performance was strong during the quarter, and we have been able to navigate the COVID-19 pandemic reasonably well. The Institutional Clients Group had an exceptional quarter, marked by an increase in Fixed Income of 68%. Global Consumer Banking revenues were down as spending slowed significantly due to the pandemic.
“We entered this crisis from a position of strength. During the quarter, our regulatory capital increased and our CET1 ratio improved to 11.5%, comfortably above our new regulatory minimum of 10%. We continued to add to our substantial levels of liquidity and our balance sheet has plenty of capacity to serve our clients. With a sharp emphasis on risk management, we are prepared for a variety of scenarios and will continue to operate our institution prudently given this unprecedented situation,” Mr. Corbat concluded.
Michael Corbat, Citi CEO, said, “While credit costs weighed down our net income, our overall business performance was strong during the quarter, and we have been able to navigate the COVID-19 pandemic reasonably well. The Institutional Clients Group had an exceptional quarter, marked by an increase in Fixed Income of 68%. Global Consumer Banking revenues were down as spending slowed significantly due to the pandemic.
“We entered this crisis from a position of strength. During the quarter, our regulatory capital increased and our CET1 ratio improved to 11.5%, comfortably above our new regulatory minimum of 10%. We continued to add to our substantial levels of liquidity and our balance sheet has plenty of capacity to serve our clients. With a sharp emphasis on risk management, we are prepared for a variety of scenarios and will continue to operate our institution prudently given this unprecedented situation,” Mr. Corbat concluded.
Performance impacted by macro environment
– Despite a challenging environment, delivered solid revenue growth, expense control and strong risk management
– Supported clients while maintaining credit discipline and balance sheet strength
– Credit reserve build primarily reflects deterioration in economic outlook and downgrades in corporate loan portfolio
– Strong deposit growth across both Consumer and Institutional franchises
Strong capital and liquidity position
– Common Equity Tier 1 Capital Ratio of 11.5%(1)
– Liquidity Coverage Ratio of 117%(2)
– Tangible Book Value per Share increased 5% year-over-year to $71.15(3)
Priorities in this uncertain environment
– Operating from position of strength from capital, liquidity and balance sheet perspective
– Maintaining resources to support clients and employees, as well as broader economy
– Demonstrating operational resiliency as we manage through COVID-19 pandemic
– Focus on risk management and building a stronger company for the future
– Despite a challenging environment, delivered solid revenue growth, expense control and strong risk management
– Supported clients while maintaining credit discipline and balance sheet strength
– Credit reserve build primarily reflects deterioration in economic outlook and downgrades in corporate loan portfolio
– Strong deposit growth across both Consumer and Institutional franchises
Strong capital and liquidity position
– Common Equity Tier 1 Capital Ratio of 11.5%(1)
– Liquidity Coverage Ratio of 117%(2)
– Tangible Book Value per Share increased 5% year-over-year to $71.15(3)
Priorities in this uncertain environment
– Operating from position of strength from capital, liquidity and balance sheet perspective
– Maintaining resources to support clients and employees, as well as broader economy
– Demonstrating operational resiliency as we manage through COVID-19 pandemic
– Focus on risk management and building a stronger company for the future
Citigroup (NYSE: C) stock price history
The image below, obtained from Google, shows the stock price history of Citigroup over the last 5 years. And it's been a pretty good time for Citigroup stockholders. 5 years ago the stock was trading at around $58.70 a stock and its currently trading at $50.15 a stock. That's a loss of -14.6% suffered by Citigroup stockholders over the last 5 years.
The stock of Citigroup is trading at closer to its 52 week low of $32 than it is to its 52 week high of $83.11 which to us is an indication that the momentum and sentiment of Citigroup stock is negative at this point in time.
The stock of Citigroup is trading at closer to its 52 week low of $32 than it is to its 52 week high of $83.11 which to us is an indication that the momentum and sentiment of Citigroup stock is negative at this point in time.
Citigroup (C) stock vs JPMorgan Chase (JPM) stock over the last 5 years
The image below shows the stock price performance of JP Morgan Chase (JPM) and Citi Group (C) over the last 5 years. And as the image shows the stock price trends of these two banking giants are very similar. Over the last 5 years the stock of JP Morgan Chase (JPM) increased by 42.^6% while the stock of Citi Group declined by -14.6% over the same period of time. Thus the stock of JPM has easily outperformed that of Citi over the last 5 years.
Recent coverage of Citigroup
The extract below discusses the latest regarding Citigroup as obtained from BusinessInsider.com
Citigroup reported second quarter earnings on Tuesday that beat analyst expectations for revenue and profit, offsetting a slowdown in the consumer banking division. Revenue increased 5% from a year ago, reflecting higher revenues in fixed income markets and investment banking. Net income was 73% lower on the year, driven by a substantially higher allowance for credit loss reserves due to the pandemic recession. Shares of Citigroup jumped nearly 2% in early trading Tuesday.
Markets and securities revenue rose 48% to $6.9 billion during the quarter, mostly driven by a 68% jump in fixed income. That offset declining Global Consumer Banking revenues that took a hit as spending slowed due to the coronavirus pandemic — revenue fell 10% on the year to $7.34 billion.
"While credit costs weighed down our net income, our overall business performance was strong during the quarter, and we have been able to navigate the COVID-19 pandemic reasonably well," said , Citi CEO, in a statement.
Read the full article here
Citigroup reported second quarter earnings on Tuesday that beat analyst expectations for revenue and profit, offsetting a slowdown in the consumer banking division. Revenue increased 5% from a year ago, reflecting higher revenues in fixed income markets and investment banking. Net income was 73% lower on the year, driven by a substantially higher allowance for credit loss reserves due to the pandemic recession. Shares of Citigroup jumped nearly 2% in early trading Tuesday.
Markets and securities revenue rose 48% to $6.9 billion during the quarter, mostly driven by a 68% jump in fixed income. That offset declining Global Consumer Banking revenues that took a hit as spending slowed due to the coronavirus pandemic — revenue fell 10% on the year to $7.34 billion.
"While credit costs weighed down our net income, our overall business performance was strong during the quarter, and we have been able to navigate the COVID-19 pandemic reasonably well," said , Citi CEO, in a statement.
Read the full article here
Citigroup (NYSE: C) latest stock valuation
So what is Citigroup stock worth based on the release of their 4th quarter 2019 and full fiscal 2019 earnings earnings report? Based on Citigroup's latest earnings report our valuation models provide a target (full value) price for Citigroup stock at $108.10 a stock. We therefore believe that the stock of Citigroup is significantly undervalued at its current price of $82.81
We usually suggest that long term and fundamental investors get in at least 10% below our target (full value) price which in this case is $108.10 Therefore we believe a good entry point into Citigroup stock is at $97.30 or below. Since the stock of Citigroup is selling at well below our target (full value price) and our suggested entry point we rate the stock of Citigroup as a buy
We usually suggest that long term and fundamental investors get in at least 10% below our target (full value) price which in this case is $108.10 Therefore we believe a good entry point into Citigroup stock is at $97.30 or below. Since the stock of Citigroup is selling at well below our target (full value price) and our suggested entry point we rate the stock of Citigroup as a buy
Next earnings release date for Citigroup
It is expected that Citigroup (NYSE: C) will release their 3rd quarter 2020 earnings report in mid October 2020