Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



What Is Citigroup's Secret Sauce?

Fellow Fools, operating under the assumption you can't properly evaluate a company as an investment if you don't know what makes that company tick, for the last few weeks we've been examining superbank Citigroup (NYSE: C  ) from top to bottom.

So far, we've looked at how Citi generates its revenue and how profitable it is. Today we're going to investigate what sets Citi apart from its peers to try to find out what its "secret sauce" is. Because every good investment has some angle or competitive edge that lets it stand out from the pack.

It's a small world, and a potentially profitable one
A look at Citi's first-quarter 2013 earnings supplement shows a surprising fact: The superbank generated $10.9 billion of its $20.5 billion in total revenue from overseas operations. That's 53.1%.

For the record, "overseas" means anything outside of North America, which Citi defines specifically as: EMEA (Europe, Middle East, Africa); Latin America; and Asia. In those geographical areas:

  • For Global Consumer Banking, Citi generated $4.9 billion in revenue overseas out of a total of $10.0 billion, or 49%.
  • For Securities and Banking, Citi generated $4.0 billion in revenue overseas out of a total of $7.0 billion, or 57.1%.
  • For Transaction Services, Citi generated $2.0 billion in revenue overseas out of a total of $2.6 billion, or 76.9%. 

This global capability and global reach in an undeniably global world is Citi's secret sauce. Even in the wake of the worldwide financial crisis, planet finance doesn't look like it's going to decouple anytime soon, and Citi is well positioned to make the most of it.

The competition
When it comes to international operations and revenue breakdowns, it's very hard to get apples-to-apples comparisons on specific numbers and metrics between two companies. This is because different companies report said numbers and metrics differently. And different business organize their lines of business differently.

Suffice it to say that both Bank of America (NYSE: BAC  ) and JPMorgan Chase (NYSE: JPM  ) both see themselves as global banks. And each in their own way are committed to competing globally. So Citi won't automatically have the world to itself.

  • In its first-quarter earnings press release, B of A specifically called out that "Global Wealth and Investment Management report[ed] record post-merger revenue, net income, and long-term assets under management." Total revenue from this line of business alone was a hearty $4.4 billion for the first quarter. 
  • In its first-quarter press release, JPMorgan specifically called out that "Corporate & Investment Bank[ing] reported strong performance across products and maintained its #1 ranking for Global Investment Banking fees." 

Foolish bottom line
Every good company, and therefore every good investment, has a secret sauce: the thing that lets it stand out from the pack. From this Fool's perspective, Citi's secret sauce is its global reach, capability, and commitment. 53.1% of total revenue coming from overseas operations is a serious commitment. The connected world isn't going away, and Citi is going to be there to reap the ongoing rewards of this connectedness.

Though some countries may be trying hard to ring-fence their banking systems, to keep them safe from the kind of cross-border contamination that let America's bursting real-estate bubble infect the world's economy, the fact is, globalization is here to stay. Banks that get this -- and are putting their time, money, and resources into maximizing the related capabilities -- are here to stay as well. 

Looking for in-depth analysis on Citi?
Then look no further than our new premium report. Inside, the Motley Fool's Senior Banking Analyst Matt Koppenheffer will give you both reasons to buy and reasons to sell Citigroup. He'll also clue you in on what areas investors need to watch going forward. And with quarterly updates included, this could quite literally be the last source of Citigroup investment research you'll ever need. For instant access to Matt's personal take on Citi, simply click here now.

Read/Post Comments (0) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2479832, ~/Articles/ArticleHandler.aspx, 9/26/2016 12:07:59 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 2 days ago Sponsored by:
DOW 18,261.45 -131.01 -0.71%
S&P 500 2,164.69 -12.49 -0.57%
NASD 5,305.75 -33.78 -0.63%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/23/2016 4:00 PM
C $47.15 Up +0.04 +0.08%
Citigroup CAPS Rating: ***
BAC $15.52 Down -0.08 -0.51%
Bank of America CAPS Rating: ****
JPM $67.25 Down -0.14 -0.21%
JPMorgan Chase CAPS Rating: ****