Citigroup: chasing consistency

Citigroup is on a hot streak. Since mid-January its shares have risen 13 per cent. Last month it did well enough in the Fed's annual stress test to promise a return of excess capital to shareholders. And its first-quarter numbers, released on Thursday, will go some way to quieting concerns about its profitability.

The bank announced earnings per share, after a debt value adjustment, of $1.52, up 17 per cent on the prior year. Importantly, Citi's returns improved - it produced a return on equity of 9.4 per cent, against 3.4 per cent for all of 2014. The bank's European and Asian operations were largely to thank for the improvements - profits in North America were lower than in the same period last year.

Citi is hitting its targets, though. In early 2013, shortly after becoming chief executive, Michael Corbat laid out some aggressive financial targets for the bank. They included a return on assets of 0.9 - 1.1 per cent and a cost-to-income ratio in the mid-50s. Excluding a debt value adjustment, the former was 1.05 per cent in the first quarter; the latter was 54 per cent.

The bank has stumbled before after showing signs of improvement. After a good 2013, the bank floundered in 2014. Uneven performance has dogged the bank and fuelled doubts about its business model.

There is a big prize if it can overcome that uneven performance. At 0.8 times book value, the shares trade well adrift of the big bank average of 1.16 times. To close that gap, however, Mr Corbat will have to turn his hot streak into a more consistent (but perhaps less spectacular) run of form.

Email the Lex team at [email protected]

© The Financial Times Limited 2015. All rights reserved.
FT and Financial Times are trademarks of the Financial Times Ltd.
Not to be redistributed, copied or modified in any way.
Euro2day.gr is solely responsible for providing this translation and the Financial Times Limited does not accept any liability for the accuracy or quality of the translation