Citigroup (NYSE:C) isn't exactly the big loser of earnings season in the banking industry, but it certainly isn't a standout, either.

In this clip from Industry Focus: Financials, host Michael Douglass and contributor Matt Frankel give a rundown of the good and bad elements of Citi's second quarter.

A full transcript follows the video.

This video was recorded on July 16, 2018.

Michael Douglass: Citigroup. A mixed bag of good and not so great news, but certainly better than Wells Fargo. They reported 27% year over year earnings growth and 2% revenue growth. Of course, a lot of that earnings growth can be attributed to tax reform, but there are other signs that the business is moving in the right direction.

Matt Frankel: Right. They're not that bad, in terms of how Wells Fargo was. They're growing in a lot of the ways we like to see. Specifically, loans and deposits were both up by 4% year over year. Citigroup is actually running a very efficient operation, even compared to some of these other Big Four banks. Their efficiency ratio is 58%. You'll recall, Wells Fargo's was 65. Their interest margin is improving nicely. They actually had the best interest margin improvement of the Big Four.

But, on the other hand, they're still not as profitable as they need to be. Citigroup still has a lot of legacy assets. They have by far the most international exposure of the Big Four banks. And their profitability is not where it needs to be. We mentioned return on assets and return on equity briefly with Wells Fargo. You generally want to see over a 10% return on equity and a 1% return on assets. In Citi's case, they're still not there. They're at 9.2% on return on equity, 0.94% on return on assets, and that's after tax reform. We would have expected tax reform to catapult these banks to the profitability levels that they needed to be at, but we really haven't seen that with Citi.

Also, in terms of trading revenue, Wells Fargo is clearly a commercial bank, they don't really deal with investing baking activities, but Citigroup does. Trading has been a big issue for the investment banks over the past couple of years, mainly because market volatility has been so low, trading revenues have been bad. Market volatility has picked up in 2018, so you would expect trading revenue to pick up along with it. For Citigroup, it was a big disappointment on trading revenue. While some of the other investment banks that we know about so far have done really well, Citigroup's trading revenue missed terribly, especially in terms of equities.

Douglass: Yeah. Like I said, kind of a mixed bag. One of the interesting things for me is this idea of these industry benchmarks. The industry benchmarks assumed, among other things, a tax format that was fundamentally different from the way things work now. The fact is that, in the past, we've expected ROEs of 10% or ROAs of 1%. Long-term, we would expect those benchmarks to move up a little bit if the current bank and tax reform takes hold and remains in place. For Citi to not even be achieving the old benchmark, before all these additional things came in, is really not great news.

Although, I will say, an efficiency ratio of 58% is a welcome change. Citigroup has historically been cheap, and usually for a reason, which is that they've really struggled to get those returns, get that efficiency ratio that the other Big Four banks usually had a little bit better locked down. It's good to see that efficiency, at least, is closer to where it needs to be, even if ROE and ROA are still pretty far off.

Frankel: Just to piggyback on that, Michael mentioned how Citigroup has been really cheap. They are by far, by far, the cheapest bank, in terms of price to earnings, price to book, price to tangible book, and by a big margin. While they're not as profitable as we'd like them to be, you get what you pay for. If you think Citigroup is going to eventually turn the ship around and be as profitable as the rest of the banks, you're getting a really good long-term bargain at the current levels.

Douglass: Right. Of course, therein lies the fundamental question.