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



1 Thing Investors Missed in the Earnings From Citigroup, Inc.

At first glance, Citigroup (NYSE: C  )  earnings couldn't have been better in the first quarter, but a deeper dive reveals one troubling reality.

Source: Flickr/asibiri.

The resounding rebound
Citigroup reported earnings per share of $1.23 per share in the first quarter of 2014, surpassing the $1.14 expectation of analysts on Wall Street. In fact, the $1.23 in earnings were identical to what it earned in the first quarter of last year.

This stands in stark contrast to competitor JPMorgan Chase (NYSE: JPM  ) , which saw its earnings drop a staggering 19% as a result of lower mortgage and trading revenue and in total its revenue fell by 8%. JPMorgan Chase also missed the expectations of analysts, who thought the bank would earn $1.41 per share versus the $1.28 at which it came in.

All of this explains why the stock at JPMorgan Chase fell by nearly 5% in the two days following the announcement, whereas Citigroup saw its stock rise by almost 4% on the day of earnings.

And while seemingly Citigroup delivered a resounding victory over JPMorgan Chase, a glance beneath the surface reveals something that didn't grab headlines, but is critical to note.

The important thing to see
Citigroup separates its earnings into two segments, Citicorp and Citi Holdings. Citicorp consists of its core operations, whereas Citi Holdings are its noncore businesses it is seeking to wind down in both a quick and rational way. As a result, a consideration of Citigroup should almost always observe the performance of Citicorp, and it is there where trouble has originated.

Source: Company investor relations.

In fact, Citigroup's income from continuing operations dropped by 10%, or $500 million to $4.2 billion from the first quarter of last year to this year. Its revenue fell by $675 million, and its return on average assets fell from 1.08% to 0.97%.

Meanwhile, its Citi Holdings' operations moved in the exact opposite direction and improved substantially. Its net loss declined from $804 million to $284 million, a gain of 65%. This was the result of both rising revenue and a reduction in what it lost from its loan portfolio.

Ultimately, the reason for the great results from Citigroup were not the result of its core businesses, but instead those it "has determined are not central to its core."

The Foolish takeaway
Citigroup undoubtedly has many appealing things going for it, and the reality remains a 10% dip in income from its continuing operations is certainly better than the 19% drop seen by JPMorgan Chase. However, it's critical for investors to see that Citigroup still faced its own set of difficulties in the first quarter, and it didn't escape unscathed.

This doesn't mean Citigroup shouldn't be considered as an investment, but the simple reality remains its results were not as great as the first glance would indicate.

Big banking's little $20.8 trillion secret
Citigroup and the other banks have been on quite a run over the last five years, but one there is one thing they don't want you to know. In fact, there's a brand-new company that's revolutionizing banking, and is poised to kill the hated traditional brick-and-mortar banks. While that's bad for them, it's great for investors. And amazingly, despite its rapid growth, this company is still flying under the radar of Wall Street. To learn about about this company, click here to access our new special free report.

Read/Post Comments (0) | Recommend This Article (6)

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.

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: 2914691, ~/Articles/ArticleHandler.aspx, 8/28/2015 5:55:41 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...

Patrick Morris

After a few stints in banking and corporate finance, Patrick joined the Motley Fool as a writer covering the financial sector. He's scaled back his everyday writing a bit, but he's always happy to opine on the latest headline news surrounding Berkshire Hathaway, Warren Buffett and all things personal finance.

Today's Market

updated 8 hours ago Sponsored by:
DOW 16,654.77 369.26 2.27%
S&P 500 1,987.66 47.15 2.43%
NASD 4,812.71 115.17 2.45%

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

8/27/2015 4:00 PM
C $53.44 Up +1.16 +2.22%
Citigroup Inc CAPS Rating: ***
JPM $64.48 Up +1.57 +2.50%
JPMorgan Chase & C… CAPS Rating: ****