Playing the World Through Citigroup

Citigroup (NYSE: C  ) is one of those companies that I think of as a stealth global play. I say that because not many people seem to know, appreciate, or care that this company gets more than 40% of its revenue and net income from international operations. Better still, the company is priced for what strikes me as very modest expectations, and that could spell long-term opportunity for patient Fools.

That said, I wouldn't necessarily expect to see Citigroup get wild praise for this quarter's report. Both revenue and net income came in below the average estimates, though not by large amounts. Revenue was up 10% and profits from continuing operations were up 11%, but you just really never know when the Street will collectively overreact to a one-penny shortfall.

Not surprisingly, Citigroup got a big boost from its investment banking operations this quarter. Like Goldman Sachs (NYSE: GS  ) and Lehman Brothers (NYSE: LEH  ) before them, fixed income provided a very nice boost to profits. And though the global consumer business posted the least growth of the three major units, double-digit income growth in both the U.S. and international subsectors was a welcome improvement.

In times like these, I think you can better appreciate the advantages of Citigroup's scale and scope. Net interest margins have been very troublesome for the bottom lines of purer-play banks like Commerce Bancorp (NYSE: CBH  ) and Fifth Third (Nasdaq: FITB  ) , but not so bad for Citigroup. And, sooner or later, when the investment banking and trading sector cools off, the stability of the consumer and commercial banking franchises at Citigroup should buffer that impact as well.

Citigroup is a sort of value-income hybrid -- a stock that, frankly, our folks at Inside Value or Income Investor could both love. And while that's good in some respects (good valuation, good income cash flow, pretty fair margin of safety), it does mean that this is not a stock that will make you wildly rich in just a short period of time. Patient investors might want to take a closer look, though, since this high-quality global operator is trading at a valuation that just doesn't seem to be presuming a whole lot of future performance.

For more Foolish financial thoughts:

Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).


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