Since the beginning of the year, Citigroup Inc (NYSE:C) has beaten the performance of the overall stock market. It has gained more than 30.80%, much higher than the S&P 500’s return of only 17.95%.
Recently, the bank has also delivered impressive second quarter 2013 earnings results. Citigroup is in the portfolios of many famous investors including Mohnish Pabrai, Julian Robertson, Jim Chanos and Leon Cooperman.
Should we buy shares of Citigroup Inc (NYSE:C) after its impressive second quarter results? Let’s take a look.
Citigroup’s impressive second quarter earnings
In the second quarter of 2013, Citigroup Inc (NYSE:C) has experienced good growth in both reported top line and bottom line. Revenue has increased from $18.4 billion in the second quarter last year to nearly $20.5 billion in the second quarter this year while net income rose from $2.95 billion, or $0.95 per share to $4.18 billion, or $1.34 per share during the same period.
What might make investors excited about Citigroup are Citicorp’s huge operations in fast growing emerging markets. In the past twelve months, out of the total $74 billion in revenue, around $32 billion came from emerging markets. Since the second quarter 2011, the bank reported that around 67% of the growth was from the emerging markets.
In the second quarter, net interest margin came in at 2.85%, with the average deposits of $424 billion, 7% higher than the average deposit of $396 billion last year. Looking forward, the bank would like to grow Citicorp’s business including loan growth via its focus on target client segments, despite headwinds in the North America mortgage segment. Moreover, it would wind down Citi Holdings while maintaining strong liquidity and capital positions. Citigroup Inc (NYSE:C) is trading at $51.80 per share, with a total market cap of $157.6 billion. The market values Citigroup at only 9.5 times its forward earnings and 0.83 times its book value. Citigroup Inc (NYSE:C) does not pay a lot of dividends to shareholders, at only 0.1% dividend yield. However, the payout ratio is extremely low, at only 1%.
How about JP Morgan and Wells Fargo?
JPMorgan Chase & Co. (NYSE:JPM) also reported a strong performance in the second quarter 2013.
Its total net revenue jumped as much as 14% from $22.18 billion in the second quarter last year to more than $25.2 billion in the second quarter 2013 while the net income experienced a significant growth of 31%, from $4.96 billion to nearly $6.5 billion during the same period. Diluted Earnings Per Share (EPS) also increased from $1.21 to $1.60. JPMorgan Chase & Co. (NYSE:JPM)’s net interest margin came in a bit lower than Citigroup, at 2.2%, with the year-over-year deposit growth of 8% to $1.2 trillion.
Wells Fargo & Co (NYSE:WFC) also enjoyed the strong second quarter 2013 earnings as well. Its revenue increased by $89 million to $21.4 billion while the net income rose as much as 19% to $5.5 billion, compared to the second quarter last year. The diluted EPS grew by 20% to $0.98 per share. Investors might like Wells Fargo & Co (NYSE:WFC) the most with its highest net interest margin among the three banks, at 3.46%. The average core deposits were up 6.4% to $936.1 billion.