Author Topic: C - Citibank  (Read 207465 times)

ERICOPOLY

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 7076
Re: C - Citibank
« Reply #10 on: March 27, 2011, 09:02:00 PM »
My C options are $2.50 strike.  I figure the odds are high that at this point the tangible book value will support the stock, and today it trades at roughly tangible book value.  It only needs to hobble along at slightly more than 10% growth rates of tangible book to get me 20+% returns.  Tangible book will be easy to grow because they have those NOLs.  If the stock dips below tangible book, there's a long way to go down to $2.50.  Worst case, the options expire worthless and I just buy more at $2.50 strike waiting for the recovery.


PlanMaestro

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 2182
    • Variant Perceptions
Re: C - Citibank
« Reply #11 on: March 27, 2011, 09:02:59 PM »
I don't disagree with much of what you wrote, but those numbers are hardly conservative. C depends a lot less on leverage now than it did in 2005, and leverage will decline even further once they have to shore up capital to comply with Basel II and III... which means ROA will need to be at least as high as the heyday to get a 12ish % ROE. They might just be able to pull that off, bit keep in mind that their international business is already running on all cylinders... so a bet on C effectively means being very bullish on the US economy, credit and housing markets.

Getting to 2 times book (which I don't think any moneycenter banks deserve afterwhat we just went through) from .8 times book requires a similar leap of faith.

Pre-tax pre-provision earnings 2010: $39 billion

S2S

  • Lifetime Member
  • Full Member
  • *****
  • Posts: 228
Re: C - Citibank
« Reply #12 on: March 27, 2011, 09:49:01 PM »
My C options are $2.50 strike.  I figure the odds are high that at this point the tangible book value will support the stock, and today it trades at roughly tangible book value.  It only needs to hobble along at slightly more than 10% growth rates of tangible book to get me 20+% returns.  Tangible book will be easy to grow because they have those NOLs.  If the stock dips below tangible book, there's a long way to go down to $2.50.  Worst case, the options expire worthless and I just buy more at $2.50 strike waiting for the recovery.


the majority of Citi's deferred tax assets only applies to US-based profits, which suits them fine... IIRC analysts model $4-5B use of DTA annually. Upside would, again, depends on positive surprise to the turnaround of their US businesses.

Congratulations on owning these options - I'm guessing you bought them early.

ERICOPOLY

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 7076
Re: C - Citibank
« Reply #13 on: March 27, 2011, 10:12:23 PM »
My C options are $2.50 strike.  I figure the odds are high that at this point the tangible book value will support the stock, and today it trades at roughly tangible book value.  It only needs to hobble along at slightly more than 10% growth rates of tangible book to get me 20+% returns.  Tangible book will be easy to grow because they have those NOLs.  If the stock dips below tangible book, there's a long way to go down to $2.50.  Worst case, the options expire worthless and I just buy more at $2.50 strike waiting for the recovery.


the majority of Citi's deferred tax assets only applies to US-based profits, which suits them fine... IIRC analysts model $4-5B use of DTA annually. Upside would, again, depends on positive surprise to the turnaround of their US businesses.

Congratulations on owning these options - I'm guessing you bought them early.

I have been holding C since last January at about $3.30.  But I actually bought those $2.50 strike last week in my RothIRA.  They have little volatility premium... it's a bit like leveraging on cheap margin (with no margin call risk).  As of this writing the account is levered 1.1x.  I bought the 2012 calls because I paid very little premium compared to the 2013 calls, and in 2012 they'll start the dividend.  I can trade out of it if we get another nice spike.  I already did trade out of C calls in that account earlier this year.  It's where I trade my C calls -- no tax.  I love RothIRAs so much -- hands off my money.

« Last Edit: March 27, 2011, 10:15:44 PM by ERICOPOLY »

twacowfca

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 2665
Re: C - Citibank
« Reply #14 on: March 28, 2011, 02:12:00 AM »
I had been starting to build a position in C with leaps and common. I was wondering what the feeling was out there re the reverse spllt. From what I have seen in the past stocks normally trended down after the consolidation. I believe a dividend was to be added. Comments..

A potential effect is that it could lower the volatility of the stock and in consequence impact the short term value of the leaps. Now, if you think like myself that Citibank has a $30 billion earnings power these issues should not affect much your decision.

That is an astute observation about the likely change in vol reducing the relative value of the leaps.   :o

NormR

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 629
Re: C - Citibank
« Reply #15 on: March 28, 2011, 08:21:19 AM »
Anyone have the stats on consolidations in general?  IIRC, they tend to be a negative short-term indicator.

ERICOPOLY

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 7076
Re: C - Citibank
« Reply #16 on: May 07, 2011, 08:40:31 AM »
Citicorp's growth:
6%   consumer loan growth YoY
16% corporate loan growth YoY

It's a bit strange.  I would consider that material, interesting information, however when you find the typical article about Citi in the media they speak only about declining revenue:

http://news.yahoo.com/s/nm/us_citigroup
« Last Edit: May 07, 2011, 08:56:29 AM by ERICOPOLY »

rjstc

  • Lifetime Member
  • Sr. Member
  • *****
  • Posts: 361
Re: C - Citibank
« Reply #17 on: May 07, 2011, 08:53:42 AM »
   In my accounts today C shows they did their 10 for 1 reverse split.

ERICOPOLY

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 7076
Re: C - Citibank
« Reply #18 on: May 07, 2011, 08:56:44 AM »

And here is a headline from April 18th:

(Reuters) - Citigroup Inc's first-quarter profit fell 32 percent as shrinking loans and poor trading results pressured revenue while expenses surged.

It's clever how they can spin the asset sales of CitiHoldings into "shrinking loans". 

Uccmal

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 3725
Re: C - Citibank
« Reply #19 on: September 02, 2011, 02:57:20 PM »
« Last Edit: September 02, 2011, 05:22:11 PM by Parsad »
GARP tending toward value