Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Citigroup Inc. (C): Will This Big Bank Be Embarrassed Again?

Page 1 of 2

Since Michael Corbat was named CEO of Citigroup Inc. (NYSE:C) in October of last year, he has emphasized his intent to cleanse the global behemoth of its struggles stemming from the financial crisis and implement a numbers-driven approach to right the ship he has sailed on for his entire 30-year career. Corbat is supposedly aiming to use scorecards to gauge the performance of the bank’s upper management, and tomorrow at 4:30 p.m., Corbat will receive his first scorecard: the results from the Federal Reserve’s annual stress tests.

Citigroup Inc (NYSE:C)Crushed under pressure
Despite being at the helm of the recovering bank for only four months, investors will not show any patience if the bank fails to meet minimum capital requirements under the Fed’s “severely adverse scenario,” as it did last year. Despite posting a Q3 2011 Tier 1 common ratio of 11.7% at the time of the last stress tests, the highest ratio among Bank of America Corp (NYSE:BAC) , Wells Fargo & Co (NYSE:WFC) , and JPMorgan Chase & Co. (NYSE:JPM) , when the harsh hypothetical economic conditions were applied, Citi’s Tier 1 common ratio crippled to below 6%. The main driver of the theoretical deterioration was losses in Citi’s consumer credit card and mortgage portfolios. This year, the conditions in the Fed’s most drastic scenario include:

Real GDP decline by between 4%-5% by the end of 2013

Unemployment rises another 4% from current levels

Housing and commercial real estate decline more than 20%

50% decline in equity prices over the course of the hypothetical recession

As previously mentioned, although Citi has built stronger capital ratios throughout 2012, investors will be watching how those ratios stand up when the global economy is waning.

Source: Citigroup Quarterly press releases.

Good things come to those who wait
The most important thing for Citigroup Inc. (NYSE:C) investors may be patience. Unlike the three other major U.S. banks, Citigroup Inc. (NYSE:C) is much more of a global institution with only around 30% of its revenues coming from North American operations. Therefore, a Citi recovery is not as a correlated with a continued U.S. economic recovery as success at Wells Fargo is. It hasn’t been all bad news for the bank as allowance for credit losses as a percentage of total loans has declined for nine consecutive quarters as high quality loans are bought onto the books.

Page 1 of 2

Biotech Stock Alert - 20% Guaranteed Return in One Year

Hedge Funds and Insiders Are Piling Into

One of 2015's best hedge funds and two insiders snapped up shares of this medical device stock recently. We believe its transformative and disruptive device will storm the $3+ billion market and help it achieve 500%-1000% gains in 3 years.

Get your FREE REPORT and the details of our 20% return guarantee today.

Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.
Loading Comments...

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 102% in 3 years!! Wondering How?

Download a complete edition of our newsletter for free!