The Two Charts That Matter From Citi's Earnings Presentation

Earlier today Citi reported earnings that missed expectations of $1.02 on an unadjusted basis ($0.95) but beat adjusted ($1.11). Same with revenue. And while one can go through the bank's 10-Q and earnings presentation, there are just two charts worth pointing out which show the same trend exhibited by JPM last week: loan loss reserve release was $1.2 billion or 40% of the $2.931 billion in after tax net income. Which is to be expected: the traditional primary driver of "earnings" continues to be an accounting fudge. Where things get dicier is when considering that in Q1 2012 mortgage credit trends are not exactly good, because just like in the case of JPM, net credit losses rose for the first time in, well, years. So: loan loss reserves are released even as the inflection point in credit losses is reached. Brilliant.

Loan Loss Reserves:

And Credit Trends:

Full presentation:

Comments

[AU5K]

They can do whatever they want, knowing that worst case, they will be bailed out by taxpayers.

[SheepDog-One]

What are these 'taxpayers' you speak of?

[Id fight Gandhi]

Issue more nat. debt

[LetThemEatRand]

Citi would glady take a hamburger from the government today in exchange for payment of said hamburger by the taxpayers over the next 100 years or so.

[AU5K]

I guess I didnt pay my fair share because I got hit with the AMT.  Meanwhile, the fair share for nearly half of americans is "nothing"....

[jeff montanye]

and, for the properly positioned, something indeed.

http://www.coburn.senate.gov/public/index.cfm?a=Files.Serve&File_id=bb1c...

[Divided States ...]

Its amazing how quickly people forgot how Citi fared in the bank stress tests, and that joke of a test set the bar very very low already.

[GOSPLAN HERO]

The United States of Socialized Losses (USSL).

[LawsofPhysics]

I can not take credit for this saying, but I like it;

"A rolling loan gathers no loss"

[mayhem_korner]

Well, they'll be bailed out by the Fed for sure.  Whether the transfer to the ultimate taxpayers will happen sans Civil War Part Deux remains to be seen...

[mayhem_korner]

Yeah, but once that Case Shiller HPI turns positive, they can go into loss reserve "build" again...just like the Fed Gov't can go into "surplus" once the economy recovers.

/s

[IToldYouSo]

I know this is off topic and I apologise in advance, but just seen this, unenforceable credit agreements......

http://www.bbc.co.uk/news/business-17670803

I love it when big finance gets slapped in the face by its own arrogance and starts shitting its pants. a sweet sweet feeling indeed

[cossack55]

Good news is never OT.

[IToldYouSo]

cheers cossack, tho my -1 tends to disagree lol

[mayhem_korner]

I love it when big finance gets slapped in the face by its own arrogance

...and what of the irresponsibility of the borrower?  Or is she just a victim?  You'll have to forgive me if I'm not "all in" on the theory that all of the world's indebtedness is a function of the lenders.

[IToldYouSo]

Until 4 years ago I would have tended to agree with you but I guess its easy to forget sometimes that big finance is supposed to be professional (manage risk, follow regulation etc). Though now we know otherwise.

If they make bad/poor decisions they can live with the consequences, afterall they were happy to pass on their losses and still pay themselves hefty salaries

Now explain to me why i should care about this fraudulent industry

[mayhem_korner]

I didn't ask you to care about any fraudulent industry.  The article is talking about revolving credit, not a mortgage or other "asset" underwriting.  Perhaps you believe that "big financial" has some special hypnosis ability to make folks spend money they don't have in a revolving credit agreement.  Personally, I don't have a lot of sympathy for folks who don't seem to have any familiarity with personal responsibility.

[IToldYouSo]

Mayhem, please dont get me wrong. Responsibility is everything and we all have our part to play - because isnt that how civil society works.

All I know is that there will always be demand for 'easy' money. The finance industry has to professionally provide for this market in a responsible manner

Seems to me that they were happy to lead society up a blind ally with their liberal and irresponsible credit confetti and still want paying or bailing.... as you sow so you shall reap

[Hard1]

And that's the "slight" credit deterioration after they have put the lipstick on the pig and cooked a few numbers