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Rating Summary:
17 Buy, 4 Hold, 1 Sell
Rating Trend: Up
Today’s Overall Ratings:
Citigroup, Inc. (NYSE: C) gave investors a mixed bag with fourth quarter results Thursday. While net income and revenues rose, they missed most analysts expectations. In response investors sent shares down 2.7 percent mid-morning, although they are off the lows.
Revenues was $18.2 billion, up from revenues of $17.2 billion for the fourth quarter 2011. Excluding CVA/DVA, fourth quarter revenues were $18.7 billion, up 8% from the prior year period but below the consensus of $18.82 billion.
Citigroup reported net income in the quarter of $1.2 billion, or $0.38 per diluted share, This compared to net income of $956 million, or $0.31 per diluted share. Excluding CVA/DVA and repositioning charges, earnings were $0.69 per diluted share, up 68% from the prior year period. This compared to the consensus of $0.96.
This is new CEO Michael Corbat first earnings call. Commenting on the reports, he said: “Our bottom line earnings reflect an environment that remains challenging- with businesses working through issues like spread compression and regulatory changes- as well as the costs of putting legacy issues behind us. However, we did make progress on several fronts. At 8.7%, we reached the target for our year-end Basel III Tier 1 Common ratio. We continue to have a very liquid balance sheet and a high-quality credit portfolio in our core businesses. It will take some time to work through the challenges of the current environment but realizing our core earnings potential, as well as improving our returns on assets and tangible equity, are critical goals going forward.”
Analysts at Goldman Sachs estimates that ex-items, core EPS was closer to $0.95.
The firm noted that this number is down from the average core EPS form Q1-Q3 2012 of $1.25. They said this decrease was driven by a large decline in reserve release in Citicorp, which could shift investor focus towards the outlook for mortgage reserve release in Citi Holdings.
While the headline EPS was lower, Goldman cited strong core loan growth, NIM stability and core expense discipline. This, according to the firm, leaves the long-term story intact.
The firm highlighted that NII was up for the second quarter in a row, as loan growth in Citicorp offset Citi Holdings run-off and NIM expanded 8bp quarter-over-quarter. Capital markets were in-line with expectations, with banking revenue up 8% quarter-over-quarter, FICC down 27% and and equity trading down 11%. Core expenses were $11.5 billion, down 1% quarter-over-quarter. Assets in Citi Holdings declined by $15 billion (9%) as the company made solid progress in running down its special asset pool.
Goldman Sachs maintained their Conviction Buy List rating on Citigroup.
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