Recent Citigroup Rally Is Not Reason To Buy

Citigroup Inc. (C) is a diversified financial services holding company, providing a range of financial products and services to consumers, corporations, governments, and institutions worldwide. Citigroup, headquartered in New York City, New York, has a market cap of $112.7 billion. Its stock price is at around $38.

On October 15, Citigroup reported its third quarter earnings. Citigroup reported revenues of $13.9 billion, a 49% decrease from the third quarter of 2011. Net income was $468 million, which was $3.3 million less than the third quarter of 2011. Earnings per share were $0.16, a decrease of $1.07 from the third quarter of 2011.

The bank’s earnings were down as it wrote off the remaining interest of its investment in the Morgan Stanley Smith Barney brokerage unit. The write off totaled about $2.9 billion. Excluding the one-time accounting charge, the bank reported a profit of $3.27 billion or $1.06 per share.

The good news to be taken from Citigroup’s earnings is that after the write-off, the bank’s earnings beat year-over-year third quarter earnings by $700 million or $0.22 per share. The results also beat analyst expectations, which called for earnings of $0.96 per share. The increase in earnings was highlighted by the 67% increase in profit from the bank’s investment banking unit.

Citigroup’s CFO John Gerspach said, “We continue to gain market share in investment banking,” due to “improved market share in every investment product.” Equity trading in Citigroup’s investment bank soared 76% from the same period a year earlier.

Citigroup was also successful at raising its deposits. Citigroup’s YTD Cumulative Deposit growth was $48.4B (5.65%) versus JPMorgan Chase’s (JPM) $12B decline (-1.06%). To continue reading, click here.