Investors have turned bullish on Citigroup
Giving it away, to give you more
Citigroup was one of only four banks that failed the recent round of Federal Reserve stress tests. While most big banks raised their payouts to investors by means of higher dividends and share buybacks, Citigroup's capital plans were quashed.
As a result, Citi has been trying to shore up its capital base by disposing of its non-core assets. Citi ended last quarter with a tier 1 capital ratio of 11.8%, and the bank hopes to strengthen its base further and eventually boost its dividends. The bank currently pays out $0.04, with a modest yield of 0.1%.
Citi isn't alone in its quest to beef up its capital base. Fellow biggie Bank of America
In addition to bolstering its capital, Citigroup CEO Vikram Pandit is relying on emerging-market performance. In 2011, 46% of Citi's total revenue and 57% of income from continuing operations came from developing economies, and the company will possibly look to those markets to further drive growth. Citi, in fact, has more exposure abroad than American big bank JPMorgan Chase
As developed countries reduce their debt, Pandit and Citigroup think GDP growth will be sluggish in these regions for some time to come. So emerging markets are definitely an area to keep an eye on.
Another factor we'll have to watch out for this quarter is Citi's loan growth. With interest rates at all-time lows, it'll be interesting to see Citi's lending activities this quarter. Last quarter, Citi saw its loans grow by 14%.
This week will give us a clearer picture of what 2012 holds for the New York-based bank. For more earnings-season insight, check out our brand-new free report: "5 Stocks Investors Need to Watch This Earnings Season." It details what to look for from Apple and four other must-watch companies as they report their latest results. Get access right now.