Citigroup Inc (NYSE:C) has got into too many problems recently including the mortgage issue. However its Q2 earnings might have saved the stock and it’s on an upside today.
Jim Sinegal, associate director of equity analysis at Morningstar, was on CNBC earlier and he discussed the problems that Citigroup Inc (NYSE:C) might have to tackle in the near future. He said that the settlement amount of $7 billion was expected by the investors and it can’t impact the stock by much. He thinks that the settlement is higher than the expectations of investors and that the department of justice is getting tougher as the settlement is moving up. The investors might be looking for the reasons on why the Department of Justice became tougher on the settlement. “We don’t actually do quarterly forecast at mornings,” Sinegal stated emphasizing that they focus on long term rather than short term.
He said that the expense side of the story would also catch the eyes of investors especially when the rates are down and the trading activity is not very good. The markets have not been that volatile either and Citigroup Inc (NYSE:C) had issues with compliance for a long time now. He also mentioned about the Mexico fraud while discussing about the issues and he feels that it would be interesting to see how the company can keep the expenses under control in between all of this.
There is also an investigation going on in the Foreign Exchange division of Citigroup Inc (NYSE:C) and there might be exits from some of the top executives in few of the divisions. Sinegal feels that the only way to cut the expenses for the company is from the bottom most segments of the employees. He also said that the management turnover has become a serious issue over the past couple of years and cited the examples of CEO change in Citigroup Inc (NYSE:C) itself along with few other key position changes in other companies.
“I think more so than the Forex, it’s this issue of management turnover,” he stated.
He also said that the decline in the trading revenue can be more than what people expect. So Citigroup Inc (NYSE:C) has a lot of issues to deal with and has to act faster.