Citigroup (C 0.84%) is one of the largest banks in the world and currently the third-largest bank by assets in the U.S. It's a lot different from some of its peers in that it runs an extremely global operation and it also runs a much smaller traditional deposit and lending operation, especially in the U.S.
The bank is currently in the midst of what is expected to be a multiyear transformation plan after generating returns that have trailed its large U.S. bank peers for a number of years now. And many, including Warren Buffett, think the plan has promise, with Buffett's company Berkshire Hathaway taking a position in Citigroup earlier this year.
It has been a long journey for the embattled bank. If you had invested $1,000 in the megabank in 2001, here's how much you would have today.
A long two decades
Citigroup was built by Wall Street legends Sandy Weill and Jamie Dimon, the latter of whom is now the CEO of JPMorgan Chase. Citigroup was one of the first megabanks to pop up on Wall Street. It was formed when Citicorp merged with Travelers Group in 1998 in a deal valued at $140 billion.
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The merger ballooned the newly created Citigroup to nearly $700 billion of assets. The deal also occurred right around when Congress repealed the Glass-Steagall Act, which separated commercial and investment banks.
Travelers Group was eventually spun off into The Travelers Companies, but the merger was a big deal at the time because it enabled one large bank to cross-sell lots of financial products to its customer base. More acquisitions would follow.
At the very beginning of 2001, Citigroup traded for about $303 per share. The stock didn't fare well in the early 2000s, as investors adapted to having a large insurance operation attached to a traditional bank. Shares fell to below $280 at one point, but Citigroup rebounded to $550 per share in May 2007. Then the Great Recession hit and the bank had too much exposure to the toxic subprime mortgages that played a large role in spurring the crisis. As a result, Citigroup charged off tens of billions of dollars worth of loans over a number of years.
The stock price plummeted and in 2008 and 2009 the government had to step in and provide Citigroup with $45 billion of bailout funds. During the worst of the Great Recession, Citigroup stock traded for less than $1. By 2011, the stock was up to above $4 per share when Citigroup announced a 1-for-10 reverse stock split, which was implemented in May of that year. That would change the stock price to about $40 per share but it didn't change the market cap or shareholder value.
Since then the stock price has been erratic. It got above $80 a share in January 2018 and then above $81 just before the pandemic. But it struggled tremendously during the early months of the pandemic and has struggled tremendously this year as well, currently trading slightly below $49 per share.
How much would you have?
So, if you invested $1,000 at the very beginning of 2001, you started with a (split-adjusted) share price of around $303 per share. By 2011, you had lost nearly all of your money, or close to 99% of it, with the stock trading at around $4.
The reverse stock split boosted shares to about $40; there hasn't been another split since. With shares currently trading slightly below $49 per share, they are up about 22.5% since the stock split. Without the stock split, that would put shares at about $4.90 per share, which means you would still have pretty much lost all of your money if you had invested $1,000 in 2001.
Still, trading at a steep discount to its tangible book value, I don't think there is a lot of downside for Citigroup at these levels. The transformation plan does seem to have the bank headed in the right direction, which is why it makes sense for existing shareholders to stay the course.
