Patience Key To Citigroup Investments

Citigroup’s (C) Chief Executive Officer has a reason to be optimistic after the company released its third quarter 2012 results. It reported net profit of $468 million, equivalent to earnings per share of $1.26 for the period. This is a decline of 88% compared to the prior year. Excluding one-off items, Citigroup posted profits of $1.06 a share. Despite the decline, this still beats consensus expectations of earnings per share of $0.98. On a quarter on quarter basis, this is higher than the $0.84 per share in the second quarter.

This comes after modest quarterly results in the previous quarters, implying that the bank has shown positive momentum. For the second quarter results, the bank reported a decrease of 12% year on year. This also beats consensus earnings expectations of $0.89 per share. The last couple of quarters showed relatively good results. This gives investors assurance that management has already addressed the issues surrounding the bank during the height of the financial crisis of 2008. In fact, this is also the reason why the bank posted better than expected profitability. The manifestations of a healthy credit position appear clear: decline in net credit of $4 billion and the release of credit reserves valued at $1.5 billion.

The good thing about having a strong balance sheet is that it can focus on growth rather than asset quality. For the period, Citi posted revenues of $17.6 billion, also down by 9% compared to the same period last year. If you strip off the credit valuation and debt valuation adjustments, revenues would amount to $18.4 billion, an increase of 5%. But, its businesses have mixed results. To continue reading, click here.