This page has been archived and commenting is disabled.
Goldman On Citi Results: Thank God For Mark To Myth... Oh Yes, Underperform Rating Remains
Goldman Sachs reaffirms Underweight on Citi. Here is the rationale:
Citi reported net income of $4.4 billion, significantly higher than the $1.6 billion in 1Q09, and revenues were basically flat at $25.4 billion yoy, but stronger than GS equity research estimates of $19.5 billion. The improvement was attributed to (1) net positive mark to market and CVA adjustments of $1.4 billion in the Special Asset Pool (2) $8 billion of securities and banking revenue with a positive CVA mark of $289 million versus a loss in 4Q09 of $1.9 billion and (3) a net reserve release of $53 million versus a $755 million net build in 4Q09. Net income increased across all segments in Citicorp and Citi Holdings except for small declines in Latin America securities and banking and Asian transaction services. Fixed income revenues excluding CVA adjustments, rose to $5.1 billion, up 77% qoq but lower than revenues of $7.5 billion in 1Q09, which was a weaker performance than peers yoy.
Asset quality in Citicorp’s consumer banking operations improved but net credit losses rose to $3 billion from $1.4 billion in 4Q09. Losses remained high in the Local Consumer Lending book in Citi Holdings with net credit losses rising qoq to $4.9 billion, a level similar to 3Q09. Nonaccrual loans fell by $3.1 billion to 3.96% of total loans while OREO remained roughly
unchanged qoq . Allowance coverage was stronger too at 171%, up from 114% in 4Q. Citi Holdings also showed improvement with non-accrual assets at 4.81% of total assets, down from 5.54% qoq. On a managed basis, NPA formation was 6.7%, which was down 44% qoq.
Quick take
After releases by JPM and BAC last week, Citi’s improvement in asset quality and capital markets revenues had been expected. However, even excluding CVA marks, trading revenues were below 1Q2009 results. While there are positive developments evident in these earnings, we remain cautious on Citigroup relative to its peers, especially at current spread levels. In addition, the company is likely to be a more frequent issuer given its relatively low share of US deposits. The overall positive mark-to market in the Special Asset Pool is a positive, but marks were still negative for CRE and Alt-A mortgages among others. Citi Holdings remains sizable at $503 billion and consumer delinquencies still remain high, with Citicorp 90+ delinquencies unchanged qoq and 30-89 day delinquencies increasing 5 bp qoq indicating risk levels remain elevated.
»
- 5062 reads
- Printer-friendly version
- Send to friend
- advertisements -
All is good, fabulous Fab is taking some time off till this all blows over. Keep buying them Goldman - umm, market - dips!
But things turned around in the final hour of trading, with the Dow, VIX and shares of Goldman Sachs
[GS 163.32 2.62 (+1.63%) ]
recovering following news that the SEC vote to sue the company was 3 to 2 — on party lines — which gave investors some encouragement that if the SEC vote was that close, getting the charges to stick might also be.
Directly from CNBC's website, I bolded the last line to show the idiocy of the market and CNBC's logic. Ohh maybe they won't catch us, rally on, nothing about the fact they fucked the world in the process.
Here's the sick joke in all of this:
- SEC/Government take actions to root out fraud, prosecute and fine criminals, clean up our financial markets = STOCKS DOWN
- SEC/Government turn blind eye, give wrist slaps to criminals, allow fraud to stay hidden and continue = STOCKS UP
And you want to invest in this market??
Especially when Citi accounts for 20% of the volume in this "healthy" market.
As regards to real estate related investments, Good luck with that mark to myth GS. Theres that constant chatter about a wave of foreclosures. BofA seems to be ready to grease the skids on foreclosures and get them back on the market. Lets see how well housing prices hold up.
BoFA now wants to help the unemployed with their mortgages now. Did they not play a bigger role in getting them unemployed in the first place ? And how much will they charge the taxpayer so that they can "help" the unemployed ?
One thing we all know about residential real estate, is they always act contrary to what they say.
When they say "we want to make housing affordable" that really means " we want to make a outhouse shack cost 550,000 and create a debt slave for life.
When they say " we want to help people stay in their houses" means "we wont help them unless they get behind in their payments, then we can force them into a recourse MHA loan mod and make their debt slavery even more certain".
Jackass bastards.
"The overall positive mark to market in SAP is a positive".
Check.
Begin with the earnings desired. Then work your way backwards.
Well done.
Dont forget those off balance sheet items not inlcuded in the new FASB balance sheet regs. $500B wind down. Note the allowance coverage differential for Citicorp and Holdings (bad bank)
Underperform = Screaming buy!
Jim Grant on Bloomberg TV now (and he is a bull)
mms://a536.l2479952400.c24799.g.lm.akamaistream.net/D/536/24799/v0001/reflector:52400
So what you actually mean is C is going to 7.5$ right?
NICE!!
Goldman may well have a stake about to be driven through it's heart. It is safe to say the stake is resting in the right spot, only needing some force to drive it home. How does Goldman play this? Do they go along counting on the other megabanks to support them in their hour of need? Don't bet on that. I suspect their storyline is they were playing a rough game by the rules used by others.
I don't think there are any rules. There is only marketshare and profit.
I suspect Goldman is feeling persecuted. A wounded Goldman may well trash around in the china shop and upset the delicate balance on Wall Street. That would be good to strike a blow at the collusion of Wall Street. Goldman will be lashing out a low hanging fruit... Citi should be in their siights.
Is Goldman wheeling and dealing like Pvt. Mellish of Saving Private Ryan fame? Are they now doing the right thing?
The Democrats need to stem their bleeding in time for November. This may be a way to do it. Drive the stake home. The other megabanks can take up the slack. Citi needs marketshare to be profitable.
I have been looking at a similar concept from a different angle. If GS remains on the ropes and wants to lash out, how about they go after JPM instead. GS and Paulson have the ability to manipulate both the treasury market and, more importantly, the gold market. Since JPM makes big market in government debt and is the biggest shorter of gold leased from the Fed, GS and Paulson can take JPM for a ride by selling goobermint debt and demanding physical delivery of gold. Everyone knows that there is not the gold available to deliver so hitting this two-rponged approach would put an enormous squeeze on JPM. If GS and Paulson were in cahoots on CDOs and it is well known that investment banking is a predatory activity toward your main competitors, a wounded GS could well do some serious damage to one of its biggest competitors.
Impossible. Goldman has no heart.
Sigh. If all of this real estate is improving in value then how is it that two of the four largest states, California and Florida are seeing higher occupancy rates under bridges than in newly built homes.
This foreclosure wave which has begun down here will mark the bottom when it is complete. Sadly that will not be until 2013 at the earliest.
Speaking just for FL, the bridge occupancy rate is overstated due to our policy of releasing captured gators in the neighborhood.
You know, they long recognized that they are untouchable lest they drop everything and cause everyone to wake up in the morning and read -200, so until the nature of the game changes, nothing will change. They won't do some "populist" action until doing so won't destroy "populist" sentiment.