Citigroup Rises Higher on Revenue Growth & Streamlining
On Nov 28, 2014, we issued an updated research report on Citigroup Inc. (C). The company exhibits decent fundamentals amid several ongoing issues. Shares of this major regional bank have recorded a year-to-date return of 5.6%.
We remain optimistic owing to Citigroup’s efforts to drive revenue growth and streamline operations. Notably, third-quarter 2014 revenues of Citigroup came in at $19.6 billion for the quarter, up 9% from the prior-year quarter. The rise was primarily driven by higher revenues from Citicorp and Citi Holdings.
In continuation of the streamlining of its international operations, Citigroup announced “strategic actions.” The company stated that it proposes to exit the consumer banking business in 11 markets as well as the consumer finance business in Korea, consisting of approximately $29 billion of assets as of Sep 30, 2014. The global footprint will now cover 24 markets that represent more than 95% of Global Consumer Banking’s (:GCB) current revenues.
The 11 markets include Costa Rica, Czech Republic, Egypt, El Salvador, Guam, Guatemala, Hungary and Japan. The company expects to significantly complete its strategic actions by the end of 2015. The move comes in line with the company’s strategy to focus on markets where it has a strong presence and long-term growth prospects.
Further, the company is continuing to offload distressed assets from its Citi Holdings unit to boost earnings and focus more on core operations. Notably, Citi Holdings’ assets declined 16% from the prior-year quarter to $103 billion and comprised only 5% of the company’s total assets at the end of third-quarter 2014.
Following the ongoing regulatory inquiries and investigations, Citigroup restated its third-quarter 2014 earnings, giving effect to additional legal charges worth $600 million. Citigroup lowered net income for third-quarter 2014 to $2.8 billion or $0.88 per share from $3.4 billion or $1.07 per share, as operating expenses were adjusted at $13 billion including additional legal expenses of $600 million.
Despite the company’s strengths, we remain cautious owing to several issues faced by Citigroup. These include elevated expenses, escalating litigation issues and the prevailing stringent regulatory landscape.
Analysts’ bearish stance on the stock was reflected in the movement of the Zacks Consensus Estimate over the past 30 days. For 2014, the Zacks Consensus Estimate declined around 1% to $3.36 per share while that for 2015 it inched up slightly to $5.39 per share.
Citigroup currently carries a Zacks Rank #3 (Hold).
Key Picks from the Sector
Some better-ranked finance stocks include Bank of the Ozarks, Inc. (OZRK), First NBC Bank Holding Company (NBCB) and Customers Bancorp, Inc. (CUBI). All three stocks carry a Zacks Rank #2 (Buy).
Read the Full Research Report on C
Read the Full Research Report on OZRK
Read the Full Research Report on NBCB
Read the Full Research Report on CUBI
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