Citigroup: Here is What You Need to Know

Citigroup Earnings ReportFrom New York early Monday morning, Citigroup (C) announced its earnings numbers for the second quarter of 2012, and the highlights of the report were generally positive at first, but the bank’s stock has leveled out near its open in early trading. The bank posted net income for the quarter of $2.9 billion (95 cents per share) on revenue of nearly $19 billion. The EPS beat estimtes by 5 cents per share, but the revenue number missed by $120 million. The revenue number was down 7 percent from a year earlier and the EPS was 2 percent smaller than in 2011.

The stock, however, is not close to reflecting the 95 cents per share, as Citigroup stock opened higher but has since lost ground, currently up just about 15 cents per share at about $26.75 in the first hour of the day.

Why such skepticism? The bank’s net income number was down 1 percent from the prior period, even with taking out of the equation the bank’s loss on its 10 percent share in Akbank ($400 million) as well as more than a $200 million gain in CVA/DVA. Net deposits were up 6 percent from Q2 2011 to $914 billion, while loans were up 10 percent to $527 billion from the prior year’s Q2 numbers. However, Citi Holdings loans of $128 billion was a 24-percent decrease, and assets of $191 billion are down 28 percent.  The loan loss reserve release of $984 million was 50 percent less than in the prior year’s Q2.

Vikram Pandit, CEO of Citi, said, “Our core businesses performed well in a difficult environment and are generating solid returns. We had strong growth in both loans and deposits, showed resilience in our markets-facing businesses, and saw record revenues in Transaction Services. We reduced Citi Holdings to approximately 10% of our balance sheet while our capital strength and liquidity continue to be among the best in the industry. We remain focused on execution, managing our expenses and our risk, and serving clients as only we can.”

This news is perceived as mixed by the Street, which doesn’t mean much for Bill Ackman’s Pershing Square and James Dinan’s York Capital Management, for example. At the end of March, Pershing had nearly $1 billion invested in Citigroup (about 12 percent of its portfolio), while York was in for nearly $325 million (about 5 percent) – and had nearly doubled its shareholding stakke in the first quarter of 2012.

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