Citigroup (NYSE:C) has had a rough go of things in 2014, but all of the negative attention may be skewing reality.
Citigroup has taken the attention from the others this year, as it first announced it had to revise its 2013 income by $400 million as a result of fraud from its unit in Mexico. And -- despite its seemingly better quantitative results -- the just the other week, it was revealed the Federal Reserve did not approve Citigroup's request to raise its dividend and buy back more common stock following the results of the stress tests.
Clearly, 2014 hasn't started the way Michael Corbat, Citigroup's CEO, had hoped.
The untold story
However, even despite all these troubles, banks have seen a remarkable rebound in their stock prices since the depths of the financial crisis. A simple glance at the change in the stock price of the companies over the last five years reveals that while things have certainly improved for all of them, Citigroup is actually lagging the others by a wide margin:
But what few fail to recognize is the reality that, even with its troubles, Citigroup has done a great job at creating value for its shareholders.
The key growth
One of the most essential measures of a bank's ability to both create and retain value is the growth in its tangible book value per share. This is the unencumbered and real capital it has from investors and retained earnings it in turn is able to utilize to create value for its shareholders.
Since the end of 2009, JPMorgan Chase has been able to grow its tangible book value per share by more than 50%, from $27 to nearly $41. And Citigroup has seen its own also rise by an impressive 33%. Yet Bank of America has only watched its number grow by 15%:
Even despite the troubles that have characterized it, Citigroup has done a remarkably good job at consistently creating value. In fact, if you instead look at the growth since 2010 for the banks, Bank of America has only seen its tangible book value per share rise by 6%, whereas Citigroup and JPMorgan Chase are up by 24% and 35%, respectively.
The reality is, Citigroup has been able to average 7.5% growth in its tangible book value per share since 2009, and the bank is now trading at a discounted price to tangible book value (0.9) -- indicating the stock market believes Citigroup is worth less than what it says it is -- versus the premium paid for JPMorgan Chase (1.5) and Bank of America (1.3). While there may in fact be more troubles ahead of it, the call of Buffett to "be greedy when others are fearful" seems to be a very fitting one when it comes to Citigroup.
Big banking's little $20.8 trillion secret
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Patrick Morris owns shares of Bank of America. The Motley Fool recommends Bank of America. The Motley Fool owns shares of Bank of America, Citigroup, and JPMorgan Chase. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.