It turns out that survival, which was no small feat, may have been the bank's easiest task. Has it, as the finance chief says, 'turned a corner'? Go to a branch to check.
"We have turned the corner," Citigroup (C, news, msgs) Chief Financial Officer John Gerspach said as he announced Citigroup's first-quarter 2010 financial results April 19.
But I have to ask: What corner is he looking at?
Can't be the corner of 40th and Broadway near my office in Manhattan. There, a dingy Citigroup branch with beat-up ATMs is barely hanging on in competition with a refurbished JPMorgan Chase (JPM, news, msgs) branch down the block (with ATMs that deposit checks without a deposit slip) and a new Capital One (COF, news, msgs) office up the block.
Bank failures in 2010
Can't be the corner of my desk, where I've got my JPMorgan Chase mortgage bill stacked near my Fidelity credit card bills. I get regular annoying phone calls from Chase asking me whether I want to refinance my mortgage. I can't remember ever getting a mortgage marketing call or letter from Citigroup. And my wife and I once had a Citigroup mortgage, and we have an account with the bank.Msn.Video.createWidget('PlayerAd1Container', 'PlayerAd', 304, 314, {"configCsid": "MSNmoney", "configName": "player-money-4x3-articles-inline", "player.vcq": "videoByUuids.aspx?uuids=1d8ec453-26d0-41b0-b4a3-599128ea157c,9b59cd25-66be-47c6-845e-6bdd3e71464e,f312a6e0-9653-4c8c-b719-00b5f4848408,5010fab8-0aac-4e16-b723-e7bef79b9851,4ab07c5b-5935-4948-ad51-d304d9f30ab4,0b2ff848-3c84-41dd-a301-6c9c3969f9d5", "player.fr": "iv2_en-us_money_article_Investing-JubaksJournal-inline"}, 'PlayerAd1');Msn.Video.createWidget('Gallery4Container', 'Gallery', 304, 150, {"configCsid": "MSNmoney", "configName": "gallery-money-articles", "gallery.linkbackLocation": "bottom_left", "gallery.numColsGrid": "3", "gallery.categoryRequests": "videoByUuids.aspx?uuids=1d8ec453-26d0-41b0-b4a3-599128ea157c,9b59cd25-66be-47c6-845e-6bdd3e71464e,f312a6e0-9653-4c8c-b719-00b5f4848408,5010fab8-0aac-4e16-b723-e7bef79b9851,4ab07c5b-5935-4948-ad51-d304d9f30ab4,0b2ff848-3c84-41dd-a301-6c9c3969f9d5;videoByTag.aspx%3Ftag%3Dmoney_dispatch%26ns%3DMSNmoney_Gallery%26mk%3Dus%26vs%3D1;videoByTag.aspx%3Ftag%3Dbest%2520of%2520money%26ns%3DMSNmoney_Gallery%26mk%3Dus%26vs%3D1"}, 'Gallery4');And this is what's happening in the bank's home market and what was once its core business of consumer and commercial banking. If Citigroup has trouble on this turf, you know it's in trouble everywhere.
The truth is that Citigroup has indeed survived. As hard and desperate as that struggle was, it may have been the easy part. What's left and what's leaving It's hard to see a future in which Citigroup is anything more than an also-ran. Just name me one line of business where, within five years, it's plausible that Citigroup will be one of the best 10 banks in the world.
While the global financial system is better off today because Citigroup didn't fail in 2008, the world of 2010 and 2011 doesn't need Citigroup for much of anything. With apologies to Irving Berlin, anything Citigroup can do, some other bank can do better.
On April 19, Citigroup reported its first operating profit -- 14 cents a share -- since the third quarter of 2007. The bank charged off only $8.4 billion in loans in the quarter -- a huge number but still 16% lower than in the fourth quarter of 2009. Its Tier 1 capital common ratio, a measure of the strength of a bank's most conservative kind of capital, stood at a huge 9.1%. It was just 3% at the depths of the financial crisis.
I don't think there's any doubt that the bank will survive. And that's a huge achievement. This is a bank that required $25 billion in capital from U.S. taxpayers in October 2008 and an additional $20 billion in December of that same year.
But look at the bank still left standing.
Citigroup's strategy has been to split itself in two.
All the really bad businesses -- and some simply outside Citigroup's core business -- have been sold already or lumped into a group called Citigroup Holdings for eventual disposal. The list of businesses that Citigroup has sold includes the Smith Barney brokerage unit, rolled into a joint venture with Morgan Stanley (MS, news, msgs) but headed for eventual sale; Nikko Securities, the third-largest brokerage company in Japan; and insurance company Primerica, partly spun off in an initial public offering in March.
But Citigroup Holdings still contains about $500 billion in assets. That's about 25% of Citigroup's total assets, and it includes subsidiaries the company wants to unload, including CitiMortgage, consumer-lending business CitiFinancial, and various toxic mortgage, credit card and loan assets.
Continued: The Citi of tomorrowMore from MSN Money and MoneyShow.com
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Hahahahaha... CITI BANK, YOUR MONEY FOR NOTHING AND YOUR CHICKS FOR FREE" days ending.
Great article Jim, You're always right.
ReplyReport AbuseThy name be ignorant #3Tuesday, April 27, 2010 8:21:53 AMGosh Jim,
I guess your sampling of two branches must signify that the other 3998 branches worldwide are in just as bad condition. Note everybody lives in your little world between 40th and 104th on Broadway, so you may need to look a little farther before telling us the global state of Citi's retail offices. My guess is that you were too slow to pick up Citi shares while they were still under $4 and you would like to inspire a sell off so you can pick them up cheap.
ReplyReport AbuseThy name be ignorant #4Tuesday, April 27, 2010 8:22:46 AM*Not everybody* ReplyReport Abuseajlujan #5Tuesday, April 27, 2010 8:24:52 AMThat's right Jim. Citi sucks big time and you have an account with them. Walk the walk.ReplyReport Abusefig333 #6Tuesday, April 27, 2010 8:26:48 AMC story is a sad case of charaters: Robert Rubin, Sandy Wiel, Pandit and the current no account Chairman of the Board. Now C is hyping overseas markets. Hey Pandit is a hedge fund guy not a banker!
ReplyReport AbuseLost Dollar #7Tuesday, April 27, 2010 8:40:59 AMJim, I will see you after the Vegas show, and we will go to the Citi ATM together to withdraw monies, and then I will show you a good time.....Please, do not bring the wifey, she will just get in the way. Also, I noticed you had shares of HSBC which once owned Household Finance! I don't think Household Finance is still in existence, but correct me if I am wrong. I think one paragraph in this article rings true and that is the Bank in China houses more money by deposits than any other. Well, 1 billion people should collectively have more money on deposit than anywhere else in the World considering Population Levels. Well Jim, let me know when you have left your office in Manhattan for your flight out of JFK for Las Vegas, and I will jump on the first available flight where I live. Look for me, I will be dressed up as Elvis!ReplyReport AbuseOldoil #8Tuesday, April 27, 2010 9:22:03 AMJim, I don't know about you, but I am saving my money to buy as large amount of Citi stock that I can. Have bought some at 3.51 and wished I had picked more up at 92 cents. Just waiting for the government to sell off their shares of Citi, which should drop the price to a bargain level.ReplyReport AbuseRockyMountainGirl77 #9Tuesday, April 27, 2010 9:55:54 AMNice to read a financial article that makes me smile. The jerks at CITI have been treating their US customers HORRIBLY for the last year, and THEY DESERVE TO FAIL!! I will be on the sidelines cheering if CITI fails entirely - because personally, they've treated me badly enough that I will not borrow another dime from ANY of their holding companies ever again. It looks like I'm not the only one voting with my dollars.ReplyReport Abusedisillusioned101 #10Tuesday, April 27, 2010 10:42:51 AMJim, this is another good article. I only wish you would come clean and tell us how you really feel about Chiti Group, LOL.
There is an old saying in corporate culture, “Never attribute to malfeasances what can easily be explained by incompetence.” In Citi Groups defense, in my dealing with them I’ve found them to be the least egregious of the mega banks and therefore the least successful. I don’t think that is necessarily a bad thing. In Citi Groups case the saying needs to be modified to read, “Never attribute to a better moral state what can easily be explained by incompetence.” lol
In my personally affairs, I’ve tried to always deal fairly and live by my word. I’ve found it to be a severe disadvantage in a corrupt business environment. The sociopaths make doing business so much more difficult as they cross the lines jumping forward in leaps and bounds only to crash in the end taking everyone else with them. Yet here I am still standing always on the look out for people of a similar mind set.
I’m watching the sociopath’s at Sachs testify today. All I can say is the incompetence defense is alive and well. What bothers me is the premeditation. They can play stupid all they want. They knew they were operating across the line defying common law principals of fairness. They were aware enough to line up a plausible deniability defense well in advance in case things went wrong. What else would you call the “they are very complicated instruments that no one understands” defense? In addition, they consciously designed their transactions so someone else would be left holding the bag and consistently made sure it wasn’t them. Than when no one stopped them, they jumped in with both feet taking full advantage of the situation. I’m not buying their defense because incompetent people don’t rise up like they did, but criminals do.
If the government doesn’t criminally hold them responsible, then it must be because the common law principals were consciously circumvented by incumbent politicians that helped write the loop holes they used to escape. Yet another reason to vote these incumbent Bass Tards out.
ReplyReport Abuse1 - 10 of 11PreviousNext_ucf13('0'); _iuc2Om1('MSNPortalInlineComments','Initial_Load_Comment_View','http://articles.moneycentral.msn.com/Investing/JubaksJournal/what-is-killing-citigroup-slowly.aspx?page=3&','en-us');Are you sure you want to delete this comment?Report AbusePlease help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease notify us using the Report abuse form below. We will investigate your report and take appropriate action against offenders. We report all illegal activity to authorities.CategoriesSpam or advertisingChild pornography or exploitationProfanity, vulgarity or obscenityCopyright infringementHarassment or threatOtherAdditional comments(optional)100 character limit To add a comment, pleasesign in/*MSN PrivacyLegalAdvertiseRSSHelpFeedbackSite mapAbout our ads© 2010 Microsoft/*The truth is that Citigroup has indeed survived. As hard and desperate as that struggle was, it may have been the easy part. What's left and what's leaving It's hard to see a future in which Citigroup is anything more than an also-ran. Just name me one line of business where, within five years, it's plausible that Citigroup will be one of the best 10 banks in the world.
While the global financial system is better off today because Citigroup didn't fail in 2008, the world of 2010 and 2011 doesn't need Citigroup for much of anything. With apologies to Irving Berlin, anything Citigroup can do, some other bank can do better.
On April 19, Citigroup reported its first operating profit -- 14 cents a share -- since the third quarter of 2007. The bank charged off only $8.4 billion in loans in the quarter -- a huge number but still 16% lower than in the fourth quarter of 2009. Its Tier 1 capital common ratio, a measure of the strength of a bank's most conservative kind of capital, stood at a huge 9.1%. It was just 3% at the depths of the financial crisis.
I don't think there's any doubt that the bank will survive. And that's a huge achievement. This is a bank that required $25 billion in capital from U.S. taxpayers in October 2008 and an additional $20 billion in December of that same year.
But look at the bank still left standing.
Citigroup's strategy has been to split itself in two.
All the really bad businesses -- and some simply outside Citigroup's core business -- have been sold already or lumped into a group called Citigroup Holdings for eventual disposal. The list of businesses that Citigroup has sold includes the Smith Barney brokerage unit, rolled into a joint venture with Morgan Stanley (MS, news, msgs) but headed for eventual sale; Nikko Securities, the third-largest brokerage company in Japan; and insurance company Primerica, partly spun off in an initial public offering in March.
But Citigroup Holdings still contains about $500 billion in assets. That's about 25% of Citigroup's total assets, and it includes subsidiaries the company wants to unload, including CitiMortgage, consumer-lending business CitiFinancial, and various toxic mortgage, credit card and loan assets.
Continued: The Citi of tomorrowMore from MSN Money and MoneyShow.com
1 | 2 | 3 | next >
Check out Jim's top stocks for the next 12 months.
Read how to invest with Jubak's showcase portfolio.
Follow the long-term portfolio from Jim's book "The Jubak Picks."
See Jim's new portfolio to help navigate the treacherous interest-rate environment.
A buddy of mine used to drive tractor trailers on Lung Island and all he hauled were truck loads of huge rolls of printed paper that said, "CITI BANK. YOU'RE PRE-APPROVED!" on them.
Hahahahaha... CITI BANK, YOUR MONEY FOR NOTHING AND YOUR CHICKS FOR FREE" days ending.
Great article Jim, You're always right.
Gosh Jim,
I guess your sampling of two branches must signify that the other 3998 branches worldwide are in just as bad condition. Note everybody lives in your little world between 40th and 104th on Broadway, so you may need to look a little farther before telling us the global state of Citi's retail offices. My guess is that you were too slow to pick up Citi shares while they were still under $4 and you would like to inspire a sell off so you can pick them up cheap.
C story is a sad case of charaters: Robert Rubin, Sandy Wiel, Pandit and the current no account Chairman of the Board. Now C is hyping overseas markets. Hey Pandit is a hedge fund guy not a banker!
Jim, this is another good article. I only wish you would come clean and tell us how you really feel about Chiti Group, LOL.
There is an old saying in corporate culture, “Never attribute to malfeasances what can easily be explained by incompetence.” In Citi Groups defense, in my dealing with them I’ve found them to be the least egregious of the mega banks and therefore the least successful. I don’t think that is necessarily a bad thing. In Citi Groups case the saying needs to be modified to read, “Never attribute to a better moral state what can easily be explained by incompetence.” lol
In my personally affairs, I’ve tried to always deal fairly and live by my word. I’ve found it to be a severe disadvantage in a corrupt business environment. The sociopaths make doing business so much more difficult as they cross the lines jumping forward in leaps and bounds only to crash in the end taking everyone else with them. Yet here I am still standing always on the look out for people of a similar mind set.
I’m watching the sociopath’s at Sachs testify today. All I can say is the incompetence defense is alive and well. What bothers me is the premeditation. They can play stupid all they want. They knew they were operating across the line defying common law principals of fairness. They were aware enough to line up a plausible deniability defense well in advance in case things went wrong. What else would you call the “they are very complicated instruments that no one understands” defense? In addition, they consciously designed their transactions so someone else would be left holding the bag and consistently made sure it wasn’t them. Than when no one stopped them, they jumped in with both feet taking full advantage of the situation. I’m not buying their defense because incompetent people don’t rise up like they did, but criminals do.
If the government doesn’t criminally hold them responsible, then it must be because the common law principals were consciously circumvented by incumbent politicians that helped write the loop holes they used to escape. Yet another reason to vote these incumbent Bass Tards out.
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