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7 Things You Need to Know About Citigroup

John Grgurich
February 28, 2013

Thinking about putting some of your hard-earned cash into shares of Citigroup (NYSE: C)? Investing in large, multi-faceted corporations -- which can be difficult to get your head around -- can sometimes seem daunting. But it doesn't have to be.

Here are seven easy-to-digest metrics I've compiled that will help you get your head around the country's third-largest bank by assets:

1. Great 2012 share-price performance
For 2012, Citi returned 39.64% to its shareholders. That's rock star performance, and a sign the bank is beginning to pull itself out of the morass it got itself into in the years leading up to and throughout the financial crisis. It's true, Bank of America (NYSE: BAC) did return 100.17% to its shareholders in 2012, but 39.64% is nothing to sneeze at.

2. Solid 2013 share-price performance
Citi has already tacked a solid 2.21% onto 2012's 39.64%. While that's not screaming performance, it does beat B of A's performance so far this year, which is a return of -6.07%. Even Wells Fargo (NYSE: WFC), that paragon of conservative lending and favorite of Warren Buffett, has only returned 0.23% to shareholders this year.

3. Struggling return-on-equity
Return on equity is a classic metric used to evaluate banks. It measures profitability from an investor's perspective: examining how much profit a company generates with the money shareholders have invested.

Citi's ROE is 4.27%. That's low, but not as low as B of A's 1.79%. Both of these banks -- big, unwieldy, and hammered so hard in the financial crash -- are currently trying to sort themselves out. That is, slim down, streamline, and figure out what their optimum business model should be moving forward. As a comparison, JPMorgan Chase (NYSE: JPM) -- a big but well-disciplined operation -- has an ROE of 10.98%.

4. Suspiciously low valuation
Price-to-book ratio, or P/B, compares a stock's market value to its book value and is another popular method for evaluating a bank stock. As a rule of thumb, look for a P/B right around 1.0 (a little less is even better), the idea being that right around 1, the stock is undervalued and you're getting a deal.

But you don't want P/B to be too low, which I believe Citi's is: 0.68. This is such a low number, rather than telling me Citi is a deal right now, it's telling me something is fundamentally wrong. I believe Citi, like peer B of A, isn't finished excising its financial-crash demons.

5. A great fourth quarter
For the fourth quarter of 2012, Citi grew its revenue by 5% year over year and grew its earnings by 25.1% year over year. For the same time period, B of A's revenue declined 25% year over year and its year-over-year earnings declined by 63.2%. In comparison, Wells Fargo had 8.5% year-over-year revenue growth and 23.9% year-over-year earnings growth for Q4 2012: not too far off from Citi's performance. Nicely done, Citi.

6. Citi has a (relatively) new CEO
Michael Corbat became CEO of Citigroup last October, after Vikram Pandit was forced out by Michael O'Neill, Citi's chairman of the board. Pandit saw the bank through a terrible time, coming on board just before the financial crash struck, but he and O'Neill reportedly didn't see eye to eye on many issues.

Corbat was handpicked by O'Neill, and though relatively unknown to shareholders, has a good reputation at Citi. Corbat has been with Citi for 30