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Citigroup: SWOT



July 22, 2010 – Comments (4) | RELATED TICKERS: C

Citigroup (NYSE: C), the baron of the big bank bailout brigade, was one of the firms at the center of the U.S. financial crisis. Lately, there have been signs of improvement at the big bank and we'll put it under the SWOT spotlight for a closer look.

More here

I believe Citi is turning the corner.  Still a fairly risky investment, but as the article concludes,  "the lights in the big Citi are starting to shine."

Please feel free to add your opinion of Citigroup or key points that should have been covered in the SWOT either here or at the article.

Fool on!


4 Comments – Post Your Own

#1) On July 22, 2010 at 6:43 PM, billypae (< 20) wrote:

How are the banks supposed to make any money to get themselves out of this mess? Interest rates are too low to make Citigroup any revenue, which the government overlooks as a source of tax revenue also. The government is being its own enemy. It's like the right hand doesn't let the left hand do anything. If banks really were allowed to make more money through banking, the government would get more taxes and everyone would be happier. We need to raise interest rates instead of worry about the stock market. We need to be more proactive instead of worried and passive aggressive. In Macroeconomics, raising the interest rates alone would increase the supply side of the supply-demand curves of GDP and prices, which would amount to more jobs alone. In other words, raising interest rates would stimulate lending by banks to corporations (supply side) and thereby create jobs. Jobs would then stimulate the equilibrium point to a point along the recovery or growth curve. Jobs help pay back debt or credit cards, and banks get more revenue. We need to help the banking sector. That much is obvious.

I wish the government would not sell itself short and low for example in Citigroup and downturn share prices by threatening to sell its shares. If the government would realize that Citigroup could return to $50 dollars a share by three years or so in a recovery to NORMAL (as it was 3-10 years ago), individual investors could again buy at the low current prices and take advantage of the huge opportunity. JP Morgan Chase, Wells Fargo, US bank, and HSBC have all made quick strides to recover back to normal stock prices, so why can't we invest heavily in Citigroup collectively WITH the government to make about 10 fold ($4.09 to 50.00 dollars per share would be a huge profit that everyone would benefit from. Wouldn't we?) If the government is tepid, consumer and business confidence is affected too. Government, can we lend more confidence to Citigroup and help invest in a sure fire winner?

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#2) On July 23, 2010 at 12:05 AM, awallejr (37.26) wrote:

I think C is heading down the right path as a company.  As an investment, that is a different matter.  Until the Fed Gov't sells off all its shares there will be continual pressure on the stock.  I think the plan is for the Feds to sell all by October.  Also I do expect an eventual reverse stock split simply because there are too many damn shares outstanding (maybe 7-1 or 10-1).  At $3-4 the stock is worth a gamble, at $30-40 I would think there are plenty alternatives.

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#3) On July 23, 2010 at 9:13 AM, rd80 (95.97) wrote:

@billypae - Thanks for the comment. The low rates are actually a positive for bank earnings. Remember, banks make money on the spread between what they borrow and what they lend. Low rates may reduce their interest revenue, but it also reduces their borrowing costs and increases loan demand. The net of those three factors nearly always translates to lower rates = higher bank earnings.

There were a lot fewer shares of Citi when it traded at $50. I don't think it's realistic to think the share price will get back to that level without a reverse split (which doesn't really change anything) and/or many, many years of share buy backs.

@awallejr - I agree.  There is a lot that could go wrong with Citi's recovery, but it seems to be headed in the right direction.  And that comes from someone who had been very negative on C until just a couple months ago.  Gov't selling is an interesting twist.  To the extent it pressures share prices down, it's good for anyone who wants to establish a position.  Not so much if you're trying to sell. 

No position in C.  I'd think about it if it pulls back well into the 3's.

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#4) On June 26, 2011 at 10:03 PM, billypae (< 20) wrote:

rd80. Thanks for the comment. i agree that the spread seems to help banks make revenue, but a higher interest rate is still more money in profits for banks in absolute dollars or money. Also, there is the nebulous factor that that banks may not lend as much with lower interest rates. Raise the interest rates and the banks will start lending more money.

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