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.
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.
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