CitigroupIt took a while -- three years, really -- but Citigroup (C), by far the weakest of the big banks coming out of the recession, is pulling through.

After this morning's second-quarter earnings report of $3.3 billion, or $1.09 per share, investors have several things to rejoice over:

  • Credit costs are plunging, falling nearly 50% in the quarter to $3.4 billion. Loan losses are dropping quickly, and cash previously set aside to cover losses is being released back to shareholders as results improve.
  • Delinquencies are dropping. Consumer loans 30-89 days late fell 21% year over year. Consumer loans more than 90 days delinquent fell 46%, to 2.3%.
  • Management is talking about dividends. "We expect to begin returning capital to shareholders next year," CFO John Gerspach said.

If you exclude periods where accounting games juiced results, this was probably Citigroup's best quarterly result in years.

Bad Bank, Good Riddance

Back in 2009, Citigroup effectively split itself into two internal units -- Citicorp and Citi Holdings. The latter was designed as a "bad bank" that quarantined a portion of its worst assets. Much of Citigroup's overall improvement is due to the rapid jettison of those assets.

Total assets in Citi Holdings fell 34% over the past year, and are now down by nearly two-thirds since 2009. Once Citi Holdings is put out to pasture for good, what's left of the Citigroup mothership will be a collection of fairly strong assets.

Still, there are risks. Citigroup is a consumer-centric bank at a time when unemployment is more than 9%. While losses have narrowed, it may be hard to generate substantial and sustainable earnings in that environment. The bank doesn't have the trading prowess of competitors JPMorgan Chase (JPM) or Goldman Sachs (GS). Even though its bailout funds have been repaid, it still has the stigma of being a ward of the state. And like all big banks, pending regulatory changes put a question mark over its future.

Citigroup has been a spectacular turnaround story, but can it win the next act by becoming a strong, sustainable earnings machine? The question remains. If the past three years taught bank investors anything, it's to stay skeptical.

Motley Fool contributor Morgan Housel doesn't own shares in any of the companies mentioned in this article. Follow him on Twitter @TMFHousel. The Motley Fool owns shares of JPMorgan Chase.

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"Trading Information @ Your Fingertips!"
Michael McDonald

July 23 2011 at 12:12 AM Report abuse rate up rate down Reply

Citigroup was "Consumed" by Morgan Stanley in Japan after Citigroup "Consumed" American Express, Discover, Washington Mutual, Advanta Bank Corp. and other Credit Card Companies, but before that, Bank Of America Consumed Morgan Stanley after the World Fortune Owner "Appropriated, Garnished for all future earnings, and Levied" Bank Of America.

Case Records can be viewed on “America Online” (AOL) at: under “Court Records” then “Case Search”.

Court Precedents:

First Precedent:
Chase Bank USA, NA vs Dereck Dodson
Case No: 050200358872007
Note: Judge Thomas J. Love's Chambers on line dated 02/14/08
"Trial Delete" 01/18/08
This Precedent was used in Bank Of America/CACH,LLC Legal Demand

Second Precedent:
CACH, LLC (Bank of America) vs Dereck Dodson
Case No: 050200074982008
Note: "Trial Delete" 05/09/08
Complaint Affidavit/Merit Trial Set 05/09/08 for 08/04/08
Case sent to 1st Floor Chambers 05/29/08
Legal Demand and Delivery Confirmation Filed "Supporting Documents Filed by DEF" 06/10/08
DEF Filed Copy of Garnishee Response 06/27/08
Judge Love Appropriation Approval Ruling 08/04/08
Case Return to Pat King-Page (Maryland Secretary of States Office) 07/06/09
1 Garnishment of Wages Executed on a Levy 08/17/09
2 Garnishments of Property Issued 08/18/09
Writ of "No Exita" Executed 10/09/09
Note: The Judge, along with a Second Judge falsely declared me "Incompetent" based on a Trespassing Charge on Property I could prove I own in this Case. I requested a "Writ of No Exita" be Served on the Judge in the Trespassing Case and the Judge in this Case wrongfully took her position even though I am completely Precedented to be "Outside of Legal/Judicial Jurisdiction in this Case". I believe this was due to me Filing Writ of Executions to Seize Commercial Zoned Properties,(Including the Property in Question), with Large Cash Collections that are used in part for Government Payrolls, and was a direct attempt to "evade and elude" my Authority over the Government and my Government-owned Corporations, Businesses, and Real Estate. I own this Money and the Money is in no way guaranteed to the Government and is only allowed for such use by my World Fortune Companies.

Third Precedent:
Wharton Enterprises LTD (Advanta Bank Corp.) vs Dereck Dodson
Case No: 0502000026682009
Note: "Trial Delete" 05/04/09

Fourth Precedent:
Asset Acceptance (Chase Bank) vs Dereck Dodson
Case No: 050200375082009
Note: Writ of "No Exita" Served 12/16/09
"No Contact" Order 12/16/09
Summons Renewal for "Contact" ATP Required to Appear 02/16/10
"Trial Delete" 02/16/10

July 16 2011 at 10:43 PM Report abuse rate up rate down Reply

I you recall Citigroup was "Consumed" by Morgan Stanley in Japan after Citigroup had "Consumed" JP Morgan Chase that "Consumed" American Express, Discover, Washington Mutual, Advanta Bank Corp., and other credit Card companies. What wasn't reported is that Bank of America "Consumed" Morgan Stanley after the "Appropriation, Garnishment of all future earnings, and Levy" of Bank OF America by the World Fortune Owner, and some of these credit card Companies are still trying to bill and debt collect on him!

July 16 2011 at 10:36 PM Report abuse rate up rate down Reply

There is no rejoicing for this piece of crap bank. They ahd to ddo a reverse split in order to stay listed on the NYSE and sinc them thy have lost another 10% of their value. Avoid all financial security stocks if you want to have any yourself. Short treasuries instead. Interest rates are going up. The longer Congress can't fix deficit spending and the debt the worse it will be for anyone holding any US governemt paper today. With a $15.2 trillion GDP for the US this year and that much debt by year end we are at 100% debt to GDP by December no the 70% democrats lie about. Can't bame them they are socialist poiticians living off the debt and deficit and wanting to create more of both.

July 16 2011 at 1:49 PM Report abuse rate up rate down Reply