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Category: Stock Market and CitiGroup (C)
Date: 13 October 2020 Stock Price of CitiGroup (C): $44.58 We take a look at the 3rd quarter earnings report of their 2020 fiscal year of Citigroup one of the biggest financial institutions in the world with revenues of $17.3 billion for the 3rd quarter of their 2020 fiscal year.
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We continue to navigate the effects of the COVID-19 pandemic extremely well. Credit costs have stabilized; deposits continued to increase; and revenues are up 3% year-to-date"
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 3rd quarter 2020 earnings report
Data below refers to the latest quarterly data unless specified otherwise:
- Revenue: $17.302 billion (up from $17.758billion for the same period of the previous year)
- Revenues decreased by -7% over the last 12 months
- Operating costs and expenses : $10.964 billion (up from $10.464 billion for the same period of the previous year)
- Operating costs and expenses increased by 5% over the last 12 months
- Net income: $3.230 billion (down from $4.913 billion for the same period of the previous year)
- Diluted earnings per share: $1.40 (down from $2.07 for the same period of the previous year)
- PE ratio of Citigroup: 7.8
- Diluted weighted-average shares outstanding: 2.094 billion (down from 2.237 billion for the same period of the previous year)
- Book value per share: $84.48 (up 4% from $81.02 for the same period of the previous year)
- Cash and cash equivalents: $25.308 billion
- Cash and cash equivalents per share: $12.08
- Cash and cash equivalents makes up 27.11% of Citigroup's market capital
- Cash and cash equivalents makes up 1.13% of Citigroup's total assets
- Loans net of allowances for losses: $640.485 billion
- Loans net of allowances makes up 28.7% of Citigroup's total assets
- Goodwill: $21.399 billion
- Goodwill makes up 0.97% of Citigroup's total assets
- Goodwill per stock: $10.21
- Stockholders equity in Citigroup: $194.595 billion
- Stockholders equity per share: $92.92
- So Citigroup is trading a 0.47 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 3rd quarter 2020 earnings report
New York – Citigroup Inc. today reported net income for the third quarter 2020 of $3.2 billion, or $1.40 per diluted share, on revenues of $17.3 billion. This compared to net income of $4.9 billion, or $2.07 per diluted share, on revenues of $18.6 billion for the third quarter 2019.
Michael Corbat, Citi CEO, said, “We continue to navigate the effects of the COVID-19 pandemic extremely well. Credit costs have stabilized; deposits continued to increase; and revenues are up 3% year-to-date. Our Institutional Clients Group again had very strong performance, especially in Markets, Investment Banking and the Private Bank. The backbone of our global network, Treasury and Trade Solutions experienced strong client engagement in the face of low interest rates. Although Global Consumer Banking revenues remained lower as a result of the pandemic, we did see higher activity in our mortgage and wealth management products.
“Our capital position strengthened during the quarter with our Common Equity Tier 1 ratio increasing to 11.8% and our Tangible Book Value per share increasing to $71.95. We remain committed to returning capital to our shareholders, subject to the industry-wide approach determined by the Federal Reserve.
“We are committed to thoroughly addressing the issues contained in the Consent Orders we entered into last week with the Federal Reserve and the Office of the Comptroller of the Currency. These investments will not only further enhance our safety and soundness, they will result in a digital infrastructure that will improve our ability to serve our clients and customers and make us more competitive,” Mr. Corbat concluded.
Michael Corbat, Citi CEO, said, “We continue to navigate the effects of the COVID-19 pandemic extremely well. Credit costs have stabilized; deposits continued to increase; and revenues are up 3% year-to-date. Our Institutional Clients Group again had very strong performance, especially in Markets, Investment Banking and the Private Bank. The backbone of our global network, Treasury and Trade Solutions experienced strong client engagement in the face of low interest rates. Although Global Consumer Banking revenues remained lower as a result of the pandemic, we did see higher activity in our mortgage and wealth management products.
“Our capital position strengthened during the quarter with our Common Equity Tier 1 ratio increasing to 11.8% and our Tangible Book Value per share increasing to $71.95. We remain committed to returning capital to our shareholders, subject to the industry-wide approach determined by the Federal Reserve.
“We are committed to thoroughly addressing the issues contained in the Consent Orders we entered into last week with the Federal Reserve and the Office of the Comptroller of the Currency. These investments will not only further enhance our safety and soundness, they will result in a digital infrastructure that will improve our ability to serve our clients and customers and make us more competitive,” Mr. Corbat concluded.
Citigroup’s allowance for credit losses on loans was $26.4 billion at quarter end, or 4.00% of total loans, compared to $12.5 billion, or 1.82% of total loans, at the end of the prior-year period. Total non-accrual assets grew 40% from the prior-year period to $5.3 billion. Consumer non-accrual loans declined 9% to $1.7 billion, while corporate non-accrual loans of $3.6 billion increased 94% from the prior-year period.
Citigroup's end-of-period loans were $667 billion as of quarter end, down 4% from the prior-year period, as reported and excluding the impact of foreign exchange translation6, driven by declines across GCB and ICG, and the continued wind-down of legacy assets in Corporate / Other.
Citigroup's end-of-period deposits were $1.3 trillion as of quarter end, an increase of 16% from the prior-year period, as reported and in constant dollars6, driven by a 17% increase in GCB and a 16% increase in ICG.
Citigroup's book value per share of $84.48 and tangible book value per share of $71.95 each increased 4% versus the prior-year period, driven by net income. At quarter end, Citigroup’s CET1 Capital ratio was 11.8%, up from the prior quarter, driven by net income, partially offset by an increase in risk-weighted assets. Citigroup’s SLR for the third quarter 2020 was 6.8%, an increase from the prior quarter. During the quarter, Citigroup returned a total of $1.1 billion to common shareholders in the form of dividends.
Solid performance despite macro environment
– Robust deposit growth across both Consumer and Institutional franchises – Revenue growth in ICG reflects strong performance in Markets and Investment Banking
– Sequential improvement in spend activity and solid digital engagement across Consumer
– Supporting clients while maintaining credit discipline and balance sheet strength
Strong capital and liquidity position
– Common Equity Tier 1 Capital Ratio of 11.8%
– Liquidity Coverage Ratio of 118%
– Tangible Book Value per Share increased 4% year-over-year to $71.95(3) Strategic execution priorities
– Committed to strengthening risk and control environment and achieving operational excellence
– Maintaining resources to support investments, clients, employees and broader economy
– Demonstrating operational resiliency as we manage through COVID-19 pandemic
– Focus on building a stronger company for the future
Citigroup's end-of-period loans were $667 billion as of quarter end, down 4% from the prior-year period, as reported and excluding the impact of foreign exchange translation6, driven by declines across GCB and ICG, and the continued wind-down of legacy assets in Corporate / Other.
Citigroup's end-of-period deposits were $1.3 trillion as of quarter end, an increase of 16% from the prior-year period, as reported and in constant dollars6, driven by a 17% increase in GCB and a 16% increase in ICG.
Citigroup's book value per share of $84.48 and tangible book value per share of $71.95 each increased 4% versus the prior-year period, driven by net income. At quarter end, Citigroup’s CET1 Capital ratio was 11.8%, up from the prior quarter, driven by net income, partially offset by an increase in risk-weighted assets. Citigroup’s SLR for the third quarter 2020 was 6.8%, an increase from the prior quarter. During the quarter, Citigroup returned a total of $1.1 billion to common shareholders in the form of dividends.
Solid performance despite macro environment
– Robust deposit growth across both Consumer and Institutional franchises – Revenue growth in ICG reflects strong performance in Markets and Investment Banking
– Sequential improvement in spend activity and solid digital engagement across Consumer
– Supporting clients while maintaining credit discipline and balance sheet strength
Strong capital and liquidity position
– Common Equity Tier 1 Capital Ratio of 11.8%
– Liquidity Coverage Ratio of 118%
– Tangible Book Value per Share increased 4% year-over-year to $71.95(3) Strategic execution priorities
– Committed to strengthening risk and control environment and achieving operational excellence
– Maintaining resources to support investments, clients, employees and broader economy
– Demonstrating operational resiliency as we manage through COVID-19 pandemic
– Focus on 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 $52.70 a stock and its currently trading at $44.58 a stock. That's a loss of -15.4% 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 vs BlackRock (BLK) over the last 5 years
The image below shows the stock price performance of BlackRock, Citigroup and JPMorgan Chase over the last 5 years. While all three are very large financial services providers their stock price trends and returns over the last 5 years are very different. The summary below shows the stock price returns provided by the three companies over the last 5 years:
- BlackRock: 75.90%
- JPMorgan Chase: 52.01%
- Citigroup: -17.7%
Recent coverage of Citigroup
The extract below discusses the latest regarding Citigroup as obtained from CNBC.com
Citigroup on Tuesday reported better-than-expected results for the third quarter, as the company’s credit costs from the pandemic stabilized.
Citi’s share price rose 1.2% in the premarket.
Here’s how the banking giant’s results stacked up:
It was not immediately clear whether those results were directly comparable to the analysts’ estimates because Citi said that earnings figure includes a $400 million civil penalty. However, if that penalty is excluded, the earnings topped Wall Street estimates by an even greater amount. “We continue to navigate the effects of the COVID-19 pandemic extremely well,” CEO Michael Corbat said in a statement. “Credit costs have stabilized; deposits continued to increase.”
Citigroup reported that net credit losses declined to $1.9 billion in the third quarter from $2.2 billion in previous three-month period. The company’s overall cost of credit also dropped to $2.26 billion from $7.9 billion on a quarter-over-quarter basis. Trading revenues for the bank’s fixed income and equities divisions topped expectations as well. Fixed income trading yielded revenue of $3.8 billion while equities raked in $875 million in sales. Analysts polled by FactSet expected fixed income and equities trading revenues to come in at $3.5 billion and $851 million, respectively. Citigroup’s results come in the midst of a major management change for the third-biggest U.S. bank by assets. Last month, the bank announced that Corbat will be replaced by his deputy Jane Fraser in February, marking the first big Wall Street bank to have a female CEO.
Read the full article here
Citigroup on Tuesday reported better-than-expected results for the third quarter, as the company’s credit costs from the pandemic stabilized.
Citi’s share price rose 1.2% in the premarket.
Here’s how the banking giant’s results stacked up:
- Earnings: $1.40 per share vs. 93 cents a share expected, according to Refinitiv.
- Revenue: $17.3 billion vs. $17.2 billion expected
It was not immediately clear whether those results were directly comparable to the analysts’ estimates because Citi said that earnings figure includes a $400 million civil penalty. However, if that penalty is excluded, the earnings topped Wall Street estimates by an even greater amount. “We continue to navigate the effects of the COVID-19 pandemic extremely well,” CEO Michael Corbat said in a statement. “Credit costs have stabilized; deposits continued to increase.”
Citigroup reported that net credit losses declined to $1.9 billion in the third quarter from $2.2 billion in previous three-month period. The company’s overall cost of credit also dropped to $2.26 billion from $7.9 billion on a quarter-over-quarter basis. Trading revenues for the bank’s fixed income and equities divisions topped expectations as well. Fixed income trading yielded revenue of $3.8 billion while equities raked in $875 million in sales. Analysts polled by FactSet expected fixed income and equities trading revenues to come in at $3.5 billion and $851 million, respectively. Citigroup’s results come in the midst of a major management change for the third-biggest U.S. bank by assets. Last month, the bank announced that Corbat will be replaced by his deputy Jane Fraser in February, marking the first big Wall Street bank to have a female CEO.
Read the full article here
Citigroup (NYSE: C) latest stock valuation
So what is Citigroup stock worth based on the release of their 3rd quarter 2020 earnings report? Based on Citigroup's latest earnings report our valuation models provide a target price (full value price) for Citigroup stock at $93.30 a stock. We therefore believe that the stock of Citigroup is significantly undervalued at its current price of $44.58
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 $93.30. Therefore we believe a good entry point into Citigroup stock is at $84 or below.
Since the stock of Citigroup is selling at well below our target price (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 $93.30. Therefore we believe a good entry point into Citigroup stock is at $84 or below.
Since the stock of Citigroup is selling at well below our target price (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 4th quarter 2020 earnings report in mid January 2021