Citigroup, Inc. (C)

So, what's your point? Citi is not Bear Stearns. Citi is a diversified financial giant, not an under-capitalized investment bank. Citi makes money year-round on all of its financial service products. While it has written down nearly 30 Billion in assets, these assets are not worthless. Additionally, these write-downs are non-cash balance sheet charges, not cash outflows. The recapitalization due to the non-cash losses is a tiny fraction of the overall write downs. Citi is, was, and will be one of the largest players in international finance and banking. Once the fair value of these assets is determined, and the financial markets stabilize, I believe Citi will return to EPS in the $3.40 to $4.10 range. Remember, the $1.05 dollar first-quarter loss included a whopping 12 Billion in write-downs. Without those items, that Citi made $1.24/share. My point is, the core-business of Citi makes sense. These banks are not going anywhere. They made some mistakes, and lost some money, but no one can convince me that Citigroup is worth less than it was in 1998. Eventually the market will figure that out. If you pass on CIti at these prices, you are missing a once-in-a-lifetime opportunity to buy a great company at a great price. This stock will greatly outperform the market over the next 3-5 years.

All our times have come
Bear Sterns but now they're gone
Investment Banks don't fear the reaper
Nor do the wind, the sun or the rain
Citibank can be like they are

Come on Citibank... Don't fear the Reaper
Citibank take my hand... Don't fear the Reaper
Your to big to fly... Don't fear the Reaper
With Helicopter Ben...

LTCM is done
Bear Sterns but now they're gone
Bear Sterns and JP Morgan
Are together in eternity...
Bear Sterns and JP Morgan

3,960 bankruptcies everyday... Like AHM and NetBank
3,960 bankruptcies everyday... Redefine happiness
Another 3,960 coming everyday...Citibank can be like they are

Come on Citibank... Don't fear the Reaper

Citibank take my hand... Don't fear the Reaper
Your to big to fly... Don't fear the Reaper
With Helicopter Ben...

Leveraged 32 to 1
Bear Sterns but now they're gone
BSC the last night of over leverage
And it was clear Bear Sterns couldn't go on
Then the door was open and the FED appeared
The Helicopter Ben blew then disappeared
The curtains flew then JP Morgan appeared
Saying don't be afraid

Come on Citibank... And Bear Sterns had no fear
And Bear Sterns took their January bonuses... Then they started to fly
They looked backward and said goodbye
Bear Sterns had become like they are
Bear Sterns had taken their bonuses
Bear Sterns had become like they are

Come on Citibank...don't fear the reaper

Why I am long Citi and other large financials.

Citigroup is one of the surviving large, mult-national banks left standing, and they are HUGE. Citi has a physical presence in over 100 countries around the world and they do business in over 140. This company processes on average over THREE TRILLION DOLLARS a day. Citi is too large for the world economy to allow to fail. Imagine the disruption their failure would cause to world commerce. They MUST NOT fail, and they will not fail. Our government, and governments around the world, simply will not let that happen.

These large financials blew it, and under all normal measures should be allowed to go BK. However, due to systemic risk the governments of the world have been creating conditions (mark-to-market/fantasy, large credit spreads) that will allow these companies to earn their way back from the abyss. And I am glad it is playing out this way because the alternative is far worse.

In 1929, the Treasury Secretary stated words to effect of, "Liquidate the banks, liquidate the businesses, liquidate the workers...", and the US government stood back with a hands off approach for the first couple of years of the crisis while banks and businesses failed en masse. Many today believe this is the approach that we should have used today; believing that the market would self-correct and heal faster than if there was intervention. Well, we all know how that worked out. It led us straight into the Great Depression. I am very glad that we are taking a differnt approach this time. Read Galbraith's book, The Great Crash of 1929.

So yes, I am long Citigroup. They will earn their way out and eventually return to profitability. And the large number of outstanding shares will eventually be reduced. This will take years to play out, but I believe that the stock value will once again rise into the high dollar values. I don't mind waiting for those kind of returns on my investment.

I hated Citi.

But Jim Cramer and others will continue to push it hard.

Their arguments are good based on history, (but not fundamentals - which I rely on), but it seems like their vision (price targets) will be realized at an accelerated pace in this environment - I can't fight it anymore.

Everyone is expecting the Government to get out of it Sept. 10th, will trade up continuously until whatever the news is on Sept. 10th.

I've given up and can't fight a company that the government won't let fail.

Hated Pandit, but now he's surrounded by people that will actually force him to be smart.

It's CRAZY, but b/c of the irrational exuberance for citi, I wouldn't be surprised if citi hit $12 a share by Sept. 10th, instead of what Cramer is saying: "$12 by 2012".

Citi is capable of trading at CRAZY volumes, lots of insider buying, gov't backstop, gov't rumors, high profile names on Citi board, such a spec play, but I can't fight this stampede, may as well ride it too.

citi seems cheap to me. Here is my logic.

Return on equity is 18% (vs c15% typical in banking)
Dividend yield 4%
Price:Book 2.1x
div payout ratio 46%

Thus they are investing c9.7% of existing equity back into the business every year from retainer earnings ((100%-46%)*18%). Assuming the P:E ratio remain similar to where it is this implies a c20% annual increase in share price(2.1*9.7%). Then add in a 4% div yield and this gives you a very nice 24% per annum return.

The key risks to this analysis is price to book contraction. The origin of citi's high P:B is that the return on equity of 18% is very high and appears to be about double the required return on equity investors are demanding. Thus there are two risks. First Return on Equity falls. While this may happen it would take a serious recession for the this to fall much below the 15% than any respectable bank should achieve. In this sector economic moats are large and changing banks is a painful process. The one real threat would be a large increase in reserves for bad loans which would accompany a large recession. This is a bit less of a risk than in the past because of better risk management technology but it is very real and could severally dent a few years of earnings. However unless this is a prolonged recession earning levels should come back in a couple of years.

The second risk is that the required return investors look for increase above the c9% they are now demanding. Again this is feasible but I do not see this risk as any greater than for the average listed company.

I think these risks are small compared with an expected 24% return (per year every year for the foreseeable future). The risk return profile appears well out of balance in the favour of new investors. Additionally I think the returns in the medium term could be much higher. This is precisely because 24% is too high. This should fall to something more reasonable for the risk ? say 20-12%. If this does happen that some of the 24% annual gains could be pricing into the stock much sooner.

As for the subjective:

1) While it is true Citi has not made a major acquisitions in some time I do not see this as a cause for concern. First they have been precluded until very recently from making major acquisitions by the Fed as a result of their shoddy internal controls. This restriction has now been lifted because of Mr. Prince's dedicated effort to improving them. It might not be flashy but it was what needed to be done. Secondly I much prefer no acquisitions to the type of value destroying purchases made by some of citi's competitors (just look at almost anything BOA has bought). Now that the restriction has been lifted I expect citi to again seriously look for purchases. With luck their conservative nature will lead them to the type of value creating acquisitions which HSBC has achieved over the last 30 years (except for CCF).

2) Citi grew very rapidly into a "financial supermarket". It is now sorting all of this out and determining where the actual benefits of this strategy. Thus the disposals of insurance and asset management. However I think the charge that they do not know if they want to be BOA or Goldman?s is a bit unfair. Citi was the first retail bank to move aggressively into investment banking and has profited handsomely. Now together with an increasingly assertive HSBC it is in a strong position to increase its market share in large scale M&A over the course of the next decade. Who else but Citi and HSBC could underwrite the multi billion $ amounts they have in a number of recent acquisitions. Goldman?s could never take this kind of risk - it just does not have the balance sheet. I would say the right comparison is than BOA/HSBC want to be Citi, Goldman?s is terrified of Citi/HSBC/BOA, and Citi is fine tuning the investment banking business model of the next 30 years.

3) dodgy accounts. Yes this is a problem for citi and is it is probably worth taking a few percentage points of the expected return as a result. However I do not think this is more than the average in what remains a manipulative US accounting system. Perhaps HSBC is a bit more conservative.

4) Basel 2 - this has been understated in recent times (in part because it was over hyped initially). Over the course of the next 5-10 years large banks who can afford the high fixed costs of setting up their own risk models will likely be able to reduce the percentage of each loan that they must back with their own equity (placed in the national reserve bank, Fed, Bank of England ext) relative to smaller organisations that are required to use the "fundamental" approach which is less accurate and more conservative. This should create a significant differential in earning capacity of the large banks relative to the small banks.

As an example of what may happen consider the following. Small bank has $1 of equity and $12.5 of Assets. They earn 1% on assets thus 12.5% on equity. Big bank only has to put $0.5m for $12.5m of assets. Thus they only need 0.5% return on Assets to get the same 12.5% return on equity or they can get 25% return on equity for the same 1% return on assets. In the first case they will force Small bank out of business and in the second they will be worth twice as much (vs book). Ether way the shareholders of Big bank wins. As well Big bank could buy Small bank for $1 put the loans through it?s own risk management systems and then get a 25% return. Thus Small bank would be worth more to the shareholders of big bank than it own shareholders. As a result ? lots of acquisitions.

5) Growth prospects remain good. As mentioned above my valuation is dependent of citi maintaining a strong return on equity and this requires good places for Mr Prince to put his money. The legacy of restrictive legislation in the US still provides ample opportunities for citi to build new branches and enter new markets domestically. Also Citi's global expansion should continue. Much has been made of possible acquisition of Standard Chartered and Barclays. Standard Chartered would be a great acquisition for Citi at the right price (it shares have had a nice run mainly on takeover rumours). It is a little known fact that Standard Chartered has a bigger presence in East Asia ex Hong Kong than HSBC.

This is kind of the Peter Lynch "graph" pick. Looking at the good old chart, I see the price quite low in relation to the earnings line. With the dividend being what it is, I see quite good returns from here. The banking business is usually underrated by many analysts, and I think this is a prime example.

Citigroup Inc. is most definitely a "King of the Hill" play. They are one of the top holdings in the S&P 500 and for good reason. They generate tremendous profits and pay out substantial amounts to shareholders. Their dividend is payout close to 50%, and as their income rises, so does the dividend. Citigroup has sold off most of its insurance divisions to focus more on their core banking business. With the purchase of TD Waterhouse's Capital Markets Business, they are a top dog in corporate and investment banking. Their consumer group is a powerhouse both in the United States and internationally. Thus, almost every dollar that trades hands at some point crosses Citigroup's path, and they're not going to let it get by without taking a cut. Relative to earnings, banks seem to trade fairly low in contrast to market capitalization; however, when it comes to investing I like to go where the money is. That means banks, and Citigroup is one of the best.

Will go bankrupt if it is not nationalized. All banks should be nationalized. They should pay 6% deposits and lend at 8% only for business, farming(not corporate farming but individual small land holder farming) and family emergencies. There should never be any Auto Loans or Home Mortages.
www.aryadharma.org

1st Qtr of Citi bank is at 32.5 B, which is batter then 08-1st Qtr at 28.6 B, the company is moving in the right direction with most numbers of employees taking care of business and one of the worlds largest bank, with $2T AST. This bank has outperformed others in the past it will again. In about Year it will sell for $30 per share. Do the math you will see, it is best time to buy C stocks. Do it now, before it is too late. JAMKING

At this PE ratio and international investments in its retail operations bearing fruit Citibank should see an improvement in Investor sentiments this fall and winter. I think this is a long term investment with good dividends.

Build position in 4 phases each of 25%. Select how much you want to invest in this stock and in first phase invest 25% amount of total investment you want to make.
If stock goes down [15%] keep averaging by adding 25% each time. Not more than 1 time in 1.5. months. So if stock keeps going down for 6 months you will be fully invested.
If in between stock keep going up don't average and go out if gain is 20% on investment.

I am putting "underperforms" on all stocks that my broker can't find enough of for me to short. Considering the recession is "over" there are a lot of them about. This one in particular I think deserves it; their "profits" are likely to disappear pretty soon.

Technical: long term trend - Down; short term trend - Down;
Options: period 04/07/2008 thru 4/11/2008 Puts:1,146,890 Calls:704,246 P/C = 1.62 - Non-Contrarian Short
Trade time frame: 1-3 days.

fall not complete, poor accounting, end of the year selloff

Pandit seems to have fooled a lot of people yesterday. This POS is going right back down. May not go bankrupt, but shareholders will continue to be diluted as it becomes obvious that the hurting isn't over. Amazing how a company can say they've had 2 fantastically profitable months when the gov't just took a huge stake last week, and has them given many billions of loans. I'm sure I could make a business selling saltwater to Hawaiians look profitable if I received billions in gov't handouts.

Ameriquest???? are you kidding me? This mess with Deville (Deval) Patrick is probably the tip of the iceberg. Subprime is dead, the housing slump is NOWHERE near over and C is going to take a beating from that side of the market. Short, short, short. Sure this won't be sliding a far south as the people without some decent business but I can't not see any overperforming here.

Citigroup will bounce back with the help of its announcement about restructuring cuts

I actually purchased this stock at 99 cents. But CAPS wouldn't let me add it to my portfolio until it passed a buck fifty. I forgot to add it as soon as it passed that mark, and now it's shot past it! Frustrating that I won't get any credit for that appreciation, but I'll add it to my CAPS holdings nonethelss.

Once I start paying my Citi student loans back real soon, expect the stock to raise a few points. I owe out the arse!