Author Topic: C - Citibank  (Read 198879 times)

PlanMaestro

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Re: C - Citibank
« Reply #20 on: September 02, 2011, 04:35:16 PM »
The C warrants are way out of the money. So I suppose the discussion here is not about survival but more on valuation? C has the tremendous advantage that they did not have a large US mortgage operation (they have some international), so those clouds are in the past. Their credit indicators are improving very fast and are very strongly capitalized, far better than BAC. Some of their strengths are the Mexican operation (Banamex) and Credit Cards.

I remember Berkowitz estimating $10 per share stabilized PTPP, and it looks a little bit aggressive but not too far off. If they can manage to double their earnings by 2019 (9-10% growth) and apply a 10x PTPP multiple, that might be a $200 target by 2019. With the A warrants at around at $0.45 ($4.5 adjusted I think) the 300x looks like a pipe dream and the B warrants are too out of the money for me (and they need C to get to $300 to get that 300x, more of a 20x with C at $200)

But a 20x for the As...
« Last Edit: September 02, 2011, 04:43:25 PM by PlanMaestro »


Uccmal

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Re: C - Citibank
« Reply #21 on: September 03, 2011, 09:02:17 AM »
I worked this out a bit.  Aside from never having looked at citi's balance sheet which precludes any investment, and having no intention to do so, these warrants are way out of the money and likely to stay that way to the bitter end.  Since the stock consolidation one now needs 10 warrants to hit the exercise price.  Or looking at it another way the exercise price per warrant has gone up 10 times to 101.16 or 178.90 (thereabouts).  Citi is trading at 28/share and has a market cap of 80 b.

What are the odds of C reaching 200 per share in 7.5 years - market cap of 560 b.  Very low i would suggest - like zero.  Why the warrants have anY value at all is beYond me.
GARP tending toward value

beerbaron

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Re: C - Citibank
« Reply #22 on: September 03, 2011, 11:10:04 AM »
I did the same math, they are way overpriced. I'd pay maybe 0.05$ for the class A. Not 0.50$!

BeerBaron

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Re: C - Citibank
« Reply #23 on: September 16, 2011, 10:52:21 PM »
I've been looking over their latest presentation again.  The one from 7/27:  http://www.citigroup.com/citi/fin/index.htm

Look at the slide #10 and they list the loan trends for the trailing 12 months of the segments in Citicorp:
Corporate loans grew 22%
Consumer loans grew 11%
Collectively, loans grew 16% in Citicorp

Within the consumer segment, Asia loans grew 20% and Latin America loans grew 25%.  Collectively they now comprise 53% of the consumer pie.  North America loans grew only 1%.  Going forward, it looks like Asia and Latin America grows from 53% to a much bigger slice of the pie.  Still a "US" bank?

CitiHoldings loans shrunk 33%.  At that pace, only two more years of drag of that size. (or several more years with much lighter drag).

Alright, when we talked about this a while back it was determined that the total assets would shrink.  But that hasn't happened yet. 

Q2 2009:  $1.849 trillion total assets
Q2 2010:  $1.938 trillion total assets
Q2 2011:  $1.957 trillion total assets

Over the past 12 months, assets in Citicorp have increased by $169 billion (14% increase), and assets in CitiHoldings have decreased by $157 billion (34% decrease).

Now, what if over the next 5 years they manage to completely run down CitiHoldings and keep the total assets at today's level of $1.957 trillion.  Pandit gave a range of 1.2% to 1.5% ROA as to what we can expect from Citigroup in the future when things settle down.  That would be about 24b or 30b net income.  Or today's stock price is about 3.5x or 2.8x that future level.

So maybe Berkowitz is right about a $100 per share price tag (last year he threw out $10 per share)?  I figure he used that 1.5% figure on the $2 trillion assets (roughly what it is today including holdings and corp/other).

I figure I must be high or something to come to the conclusion that it's possibly trading at 3.5x or 2.8x normalized earnings right now ("normalized" once the assets are sold in CitiHoldings and invested in Citicorp, and they earn 1.2%-1.5%). 

Can Citicorp continue to grow it's asset size at a pace matching the reductions in CitiHoldings?  They did it over the past year when Holdings shrunk 34% from a high humber.  Unless they are going to be all run down in 2 years, it will be easier to match the reductions at CitiHoldings with gains at Citicorp.





« Last Edit: September 16, 2011, 11:52:24 PM by ERICOPOLY »

ERICOPOLY

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Re: C - Citibank
« Reply #24 on: September 21, 2011, 01:35:29 PM »
I recognize that people are worried over what's becoming of the net interest margins in the US banks, but does that really affect the margin earned in Latin America and Asia where they make more than 1/2 of their profit?

Down to 55% of tangible book value now.  They grew tangible book value by 16% the past 4 quarters.  Will be interesting to see what can be sustained going forward, but buying back shares at this price will go a long way.  So suppose the stock does linger at these levels for quite a while -- they begin returning capital to shareholders next year.  Buybacks at 1/2 of tangible book should boost the growth rate.  I mean, just a 3% buyback can add 3% to the tangible book value per share.  That seems like ample compensation against slower than usual earnings.  Like if they payout 1/2 of their earnings, and they make 12% return on tangible equity, then it's really an 18% growth rate in tangible book per share (or the equivalent of the same thing if you use your dividend to buy more shares).  And those tax losses carried forward make the 12% return increasingly likely.

« Last Edit: September 21, 2011, 01:41:47 PM by ERICOPOLY »

PlanMaestro

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Re: C - Citibank
« Reply #25 on: September 21, 2011, 01:53:00 PM »
I recognize that people are worried over what's becoming of the net interest margins in the US banks, but does that really affect the margin earned in Latin America and Asia where they make more than 1/2 of their profit?

No

Junto

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Re: C - Citibank
« Reply #26 on: September 22, 2011, 10:17:36 AM »
@Gatorcapital is digging deep: http://bit.ly/n3V827

First of three part series.

tombgrt

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Re: C - Citibank
« Reply #27 on: October 12, 2011, 07:44:34 AM »
Up 38% from its low.  :o

Was going to pick some up besides my BAC position but I might just missed the chance. It's a crazy deal even right now but I would have to sell FFH or BRK and I just don't like giving that up in the current environment.
« Last Edit: October 12, 2011, 07:50:02 AM by tombgrt »

ERICOPOLY

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Re: C - Citibank
« Reply #28 on: December 15, 2011, 08:10:38 PM »
I was just looking at page 10 of their Q3 presentation tonight (http://www.citigroup.com/citi/fin/data/p111017a.pdf?ieNocache=799).

The slide breaks down their Asia consumer loans -- 40% mortgages.

Interesting (to me) is that their largest Asia markets are Korea, Singapore, and Hong Kong.

Apparently loan-to-value ratios for mortgages are capped by regulations at these levels:
Korea           60%
Singapore     80%
Hong Kong   50%-70%

Mortgages in these markets are full recourse. 

The thing that struck me as funny is this bias that I get from the media that all things emerging markets are inherently risky.  I don't believe we have any regulations whatsoever on LTVs in the USA, let alone Korea's 60%.


MrB

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Re: C - Citibank
« Reply #29 on: December 16, 2011, 10:40:06 AM »
I was just looking at page 10 of their Q3 presentation tonight (http://www.citigroup.com/citi/fin/data/p111017a.pdf?ieNocache=799).

The slide breaks down their Asia consumer loans -- 40% mortgages.

Interesting (to me) is that their largest Asia markets are Korea, Singapore, and Hong Kong.

Apparently loan-to-value ratios for mortgages are capped by regulations at these levels:
Korea           60%
Singapore     80%
Hong Kong   50%-70%

Mortgages in these markets are full recourse. 

The thing that struck me as funny is this bias that I get from the media that all things emerging markets are inherently risky.  I don't believe we have any regulations whatsoever on LTVs in the USA, let alone Korea's 60%.



What about Aus? 10% of loans. When I read what folks like Steve Keen http://www.debtdeflation.com/blogs/ says then that 10% might turn out to be pretty big. What do you make of it?