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Analyst View: Citigroup earnings fall as legacy assets weaken
July 16, 2012 / 1:13 PM / 5 years ago

Analyst View: Citigroup earnings fall as legacy assets weaken

(Reuters) - Citigroup Inc posted a 12 percent decline in second-quarter net income as losses widened in its Citi Holdings unit, where the bank has assets it is looking to shed.

The following are comments from analysts, investors and others on the results:

TONY SMITH, DIRECTOR, MOODY'S ANALYTICS, NEW YORK

"This is a continuation of the trend we've been seeing at Citi for a while - a slow healing of the balance sheet, but significant persistent challenges in healing profitability. Revenue growth remains very challenged. It's hard for them and all big banks to find good loans on which to make a spread and difficult to generate fees.

They beat Street consensus after adjusting for the Turkey bank sale and credit/debt valuations, but there's nothing I would call jaw-dropping in the announcement. Lower problem loans, higher capital and better liquidity are definitely constructive; the profitability challenge is likely to continue to be an overhang for a while."

JEFF SICA, PRESIDENT, SICA WEALTH MANAGEMENT, MORRISTOWN, N.J.

The independent wealth manager has $1 billion in assets under management and is short Citigroup.

"The EPS number is irrelevant. There has been a lot of guidance that has been given beforehand in terms of making sure analysts who cover Citigroup were keeping their expectations very low. I see this as a guided number. I think it was Citigroup's intention all along to beat that number from an EPS standpoint.

"I have very little optimism that this is going to have any relevance other than a few brief moments today."

"They still have enough market share to generate revenue and EPS. The problem is they have no justifiable way to grow. For example, the growth they saw in underwriting, they have been in the doldrums for so long it didn't take much for them to get a little more business than they've gotten. Also with the supposed housing recovery, they have captured some of that, with the (mortgage) refinance trend going on. All those things are temporary."

"We have a supposed housing recovery that stalls. We have the continued false optimism in Europe. So Citigroup was able to ride the false momentum up to this point, but not justify any means of dealing with the potential collapse of the European Union, the effect that will have on the emerging markets and the ultimate effect on their bottom line. They have not been addressing how they're going to adjust the business model."

MIKE HOLLAND, FOUNDER, HOLLAND & CO LLC, NEW YORK

"They've had their tough times since 2008. This looks like management's best performance.

"The headline numbers look like they are all pretty healthy. Just as JPMorgan and Wells Fargo helped confidence in the stock market on Friday, I think whatever the market is going to do today ..., it will be either less bad or somewhat better because of this. They are in so many businesses in so many parts of the world that there is some comfort to be gained by this."

Reporting by Rick Rothacker in Charlotte, North Carolina, Jed Horowitz in New York; Editing by Lisa Von Ahn

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