7 Things You Need to Know About Citigroup


Thinking about putting some of your hard-earned cash into shares of Citigroup ? Investing in large, multi-faceted corporations -- which can be difficult to get your head around -- can sometimes seem daunting. But it doesn't have to be.

Here are seven easy-to-digest metrics I've compiled that will help you get your head around the country's third-largest bank by assets:

1. Great 2012 share-price performance
For 2012, Citi returned 39.64% to its shareholders. That's rock star performance, and a sign the bank is beginning to pull itself out of the morass it got itself into in the years leading up to and throughout the financial crisis. It's true, Bank of America did return 100.17% to its shareholders in 2012, but 39.64% is nothing to sneeze at.

2. Solid 2013 share-price performance
Citi has already tacked a solid 2.21% onto 2012's 39.64%. While that's not screaming performance, it does beat B of A's performance so far this year, which is a return of -6.07%. Even Wells Fargo , that paragon of conservative lending and favorite of Warren Buffett, has only returned 0.23% to shareholders this year.

3. Struggling return-on-equity
Return on equity is a classic metric used to evaluate banks. It measures profitability from an investor's perspective: examining how much profit a company generates with the money shareholders have invested.

Citi's ROE is 4.27%. That's low, but not as low as B of A's 1.79%. Both of these banks -- big, unwieldy, and hammered so hard in the financial crash -- are currently trying to sort themselves out. That is, slim down, streamline, and figure out what their optimum business model should be moving forward. As a comparison, JPMorgan Chase -- a big but well-disciplined operation -- has an ROE of 10.98%.

4. Suspiciously low valuation
Price-to-book ratio, or P/B, compares a stock's market value to its book value and is another popular method for evaluating a bank stock. As a rule of thumb, look for a P/B right around 1.0 (a little less is even better), the idea being that right around 1, the stock is undervalued and you're getting a deal.

But you don't want P/B to be too low, which I believe Citi's is: 0.68. This is such a low number, rather than telling me Citi is a deal right now, it's telling me something is fundamentally wrong. I believe Citi, like peer B of A, isn't finished excising its financial-crash demons.

5. A great fourth quarter
For the fourth quarter of 2012, Citi grew its revenue by 5% year over year and grew its earnings by 25.1% year over year. For the same time period, B of A's revenue declined 25% year over year and its year-over-year earnings declined by 63.2%. In comparison, Wells Fargo had 8.5% year-over-year revenue growth and 23.9% year-over-year earnings growth for Q4 2012: not too far off from Citi's performance. Nicely done, Citi.

6. Citi has a (relatively) new CEO
Michael Corbat became CEO of Citigroup last October, after Vikram Pandit was forced out by Michael O'Neill, Citi's chairman of the board. Pandit saw the bank through a terrible time, coming on board just before the financial crash struck, but he and O'Neill reportedly didn't see eye to eye on many issues.

Corbat was handpicked by O'Neill, and though relatively unknown to shareholders, has a good reputation at Citi. Corbat has been with Citi for 30 years and seems off to a good start, if fourth-quarter results are any indication.

7. Citi is slimming its workforce
Having been through layoffs myself, and having watched my father go through his fair share as I was growing up, first let me say how much I hate job cuts. But let me also say that sometimes an organization has no choice but to let people go, especially if it's in the best interests of the business overall, on which many more jobs rely.

Citi announced this past December it will be cutting 11,000 jobs worldwide, and it's not the only bank putting people on the chopping block in an effort to streamline and stay competitive. JPMorgan Chase just announced two days ago it will be cutting 17,000 jobs over the next two years.

Job cuts are a hardship for those affected, but so many Wall Street banks became so bloated in the run-up to the financial crisis that even cuts this large come as little surprise.

Final Foolish thought
Citi is a bank that's come a long way since the financial crisis, but still has a long way to go. Strong performance on some metrics is belied by poor performance on others. I wouldn't call Citi a buy yet, but I think the superbank will be in the not-too-distant future.

Don't let this lone Fool have the last word when it comes to Citigroup. In our new premium report, Matt Koppenheffer -- The Motley Fool's Financials bureau chief -- fills you in on both reasons to buy and reasons to sell Citigroup, and what areas the bank's investors need to watch going forward. For instant access to Matt's personal take on Citi, simply click here now.

The article 7 Things You Need to Know About Citigroup originally appeared on Fool.com.

John Grgurich owns shares of JPMorgan Chase. The Motley Fool recommends Wells Fargo. The Motley Fool owns shares of Bank of America, Citigroup, JPMorgan Chase, and Wells Fargo. 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.

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