A company that isn’t growing — that isn’t expanding its reach and increasing its revenue and profit — probably isn’t a company that makes for a good investment. Though we may not typically think of them in this way, banks are no different: Publicly traded banks are under the same shareholder pressure for growth as any other company.
Today we’re going to apply this investment thesis to Citigroup Inc. (NYSE:C) to see how the country’s third-biggest bank can get even bigger than it already is, and make it a better investment than it already is.
The secret sauce that’s no secret
Last week, we talked about Citi’s secret sauce: the competitive edge that makes it stand apart from its peers. That secret sauce is its overseas operations, from which it made 53.1% of its revenue in the first quarter. In a global economy that doesn’t look like it’s going to de-globalize anytime soon, Citigroup Inc. (NYSE:C)’s secret sauce tells us where Citi’s best chance for continued growth is. How does Citi stack up against the competition overseas?
First a word from Wells Fargo & Co (NYSE:WFC) CEO John Stumpf, taken from a June 2 Financial Times article discussing where the country’s fourth-largest bank is looking for its growth: “We are largely a domestic bank, and we like it that way.” Stumpf went on to say that “the 3% of revenue made overseas is probably not going to change a lot.”
So that’s at least one big bank not competing with Citigroup Inc. (NYSE:C) for overseas business. What about Bank of America Corp (NYSE:BAC) and JPMorgan Chase & Co. (NYSE:JPM)?
It’s challenging to try to make apples-to-apples comparisons when it comes to what the big banks are up to overseas: parsing out precisely where and how they generate their revenue and profit. This is because different companies have different ways of structuring their businesses, and different ways of reporting their numbers. But here’s what we can see for B of A and what it calls “Global Banking,” and JPMorgan and what it calls “Corporate & Investment Banking”:
–For Q1 2013, B of A reported total revenue of $4.2 billion in its Global Banking unit. That’s 18.1% of total Q1 revenue.
–For the same time period, JPMorgan reported total revenue of $10.1 billion from Corporate & Investment Banking, of which $4.9 billion came from overseas operations; this means overseas operations accounted for 19% of total revenue.