Citigroup: A Strong Buy for Long-Term Investors
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Citigroup (NYSE: C) is a favorable long-term investment in the banking industry. Citigroup has taken quite a dive since before the financial crisis when its stock price was up over $500 per share. Its prominence depends greatly on the global economy but the numbers on its balance sheet shows that Citigroup has been improving and may have turned the corner over the past few years.
This is a global bank with a presence in over 160 countries so it is imperative to be cautious depending on the status of the global economy. The stock price is around $26 per share but it may be advisable to wait to see if any dips occur as a result of the JP Morgan (NYSE: JPM) trading loss and the struggling economies in Greece, Spain and the rest of Europe. According to the balance sheet, even at $26 per share this would be a very promising investment at this point if investors hold long-term through the potential dips of 2012.
Citigroup is focusing on emerging markets in Asia and Latin America to help bolster its growth. This is reason enough to begin to invest in this stock now regardless of the stigma that exists in America and the dilemma in Europe. Almost across all important benchmarks on the balance sheet, Citigroup is showing growth over the past three years. Both the net margin and operating margin have increased quarter by quarter and over the past three years since 2009.
The return on equity has also increased and the current ratio has been over one. Earnings per share have grown over 190% since the last quarter and over 10% since last year. Both the debt to equity and the debt to capital ratios have also decreased over the few quarters. The price-to-earnings ratio is better than the industry average while the growth and margin figures are close to matching the industry average as business improves. The 52 week range per share has been between $21 and $43, while the 200 day moving average is $31 and the 50 day moving average is over $33; investing at $26 is reasonable considering Citigroup's recent increase in promising indications could push the stock price higher before any dips are seen until much later in the year towards mid-summer.
Citigroup has been traditionally structured into two factions. It is currently phasing out Citi Holdings which accounted for less than 8% of total revenue with no substantial growth. Citigroup reported over $19 billion in revenue for the first quarter, an increase of 13% since the last quarter of 2011. Citicorp accounted for over 93% of this revenue. Net income was down by over 2% from last year while there was a net gain of over $400 million from minority investments. Citigroup focuses its efforts into two operations, Global Consumer Banking and Institutional Business. Citigroup is a leader in both of these operations in terms of global banking. As the world economies, emerging markets and developing countries continue to grow and evolve so will Citigroup’s book of business and overall value in the industry. Citi is the one of the world’s largest issuers of credit cards and it is also taking its Citi Mortgage services to expand in emerging markets.
Citi Commercial Banks service over 100,000 small and medium size businesses in over 30 different countries. Through its Citi Retail Services, Citigroup is able to partner with corporations like Home Depot (HD), Exxon Mobil (XOM) and Macy’s (M). In its institutional operations Citi services businesses, governments and institutions with corporate and investment banking in over 160 countries.
Citi manages over $3 trillion each day in capital transaction services for over 140 countries around the world. Global Consumer Banking accounted for 56% of Citi’s revenue, increasing by less than 5% from last year. Transaction services accounted for 15%, increasing by 7% from last year. North America accounted for 40% of the revenue, decreasing by less than 9% from last year. Asia and Latin American combined for 44% of the revenue, increasing by around 10% from last year. Offering corporate and consumer services in these emerging markets while maintaining a presence in North America will ensure that Citi maintains its position as the global banking leader around the world.
Sales growth is really the only decline Citi has seen over the past few years, everything else from net income, EPS, cash flow and EBITDA has seen a substantial increase since 2009. Citigroup was able to generate over $72 billion in revenue over the past year and over $ 10 billion in earnings. Companies like Citigroup, GE (GE) and Cisco (CSCO) that focus on globalization and macro services are always a wise long-term investment. Citigroup has shown its value in the market place before and it seems to be on the way to regaining that market value once again as more countries begin to develop, evolve and others recover from the recession. Citi is also making bold moves to further instill more goodwill to its name.
Citi recently announced another MasterCard venture with American Airlines for small business owners, while also becoming the official banking sponsor for the Olympics and Paralympics in London for 2012. Citi has been recognized multiple times by the world’s leading asset owners, managers and banks as the premier global custody service provider in the world for 2012.
Citigroup is clearly a wise investment for the long-term. Investors should be aware of potential dips in the stock price this year but the positive growth seen in the balance sheet and the assertive moves to improve its reputation around the world are promising implications that Citi will remain the global banking leader in the future. Its value in the markets will begin to reflect its growth and prominence by 2013.
As the stigma of the banking industry subsides in America, Citi’s popularity will begin to grow again in the United States. The Olympics this year should have a profound effect on Citi’s goodwill and stock price and the emerging markets in Asia will continue to push growth as these countries develop into more productive consumer nations.
BobbyFisher has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.