How Citigroup's Strategic Initiatives Are Panning Out

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How Citigroup's Strategic Initiatives Are Panning Out PART 1 OF 7

Citigroup Is Focusing on This amid Lower Growth

Core banking

Citigroup (C) has focused on expanding its loan book, improving credit quality, and trading and investment banking revenues over the past few quarters. The bank has witnessed a steady rise in operating earnings due to rising net interest margins, an expanding loan book, and investment banking revenues.

Commercial bankers (XLF) are focusing on expanding their loan books as trading revenue stabilizes or declines due to higher broad market valuations. JPMorgan Chase (JPM), Goldman Sachs (GS), and Bank of America (BAC) have seen lower trading revenues in 2Q17, mainly due to lower volatility and high valuations.

Citigroup Is Focusing on This amid Lower Growth

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Citigroup saw a sequential fall in EPS (earnings per share) in 2Q17 to $1.28, compared with $1.35 in 1Q17 and $1.24 in 1Q17. Analysts had expected EPS of $1.21 on lower investment banking revenues.

Citigroup’s 2Q17 revenues grew to $17.9 billion, which represents a rise of 2% YoY (year-over-year) but a 1% sequential decline. Citi’s institutional group revenues expanded by 6%, and consumer banking grew 5%, reflecting higher margins, credit offtake, and strategic transaction advisory.

The earnings were impacted largely due to a decline of 45% to $653 million in corporate or other earnings, as the banking giant is winding down its legacy assets and divestiture activity.

Growth slowing

Commercial bankers have enjoyed rate hikes by Fed in recent quarters, as reflected in their rising margins, but as the cost of funds gets adjusted and further rate hikes seem lower and distant, margins can stabilize for bankers at current rates.

Citigroup’s book value per share rose 6% to $77.36 YoY in 2Q17. Its tangible book value per share expanded by 6% to $67.32.

In this series, we’ll discuss Citigroup’s expected performance by division, operating margins, strategic initiatives, shareholder payouts, dividends, valuations, and analyst ratings. Keep reading (below) for more.


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