This morning the first financial news item that came across my screen was Citigroup's quarterly results beating expectations. Sounds good to me. Citigroup shareholders could use some good news. Then, I dug into the earnings report and admit to raising an eyebrow.
Income from continuing operations rebounded from a loss of $5.2 billion to a gain of $1.6 billion. Good stuff. Then we dug a little deeper. Global Cards division..ooh that one dropped a lot. Consumer banking? hmm...$1.2 billion in the red. Global Wealth Management? slight drop in a small part of the business. So where did the big advance come from? Institutional Clients Group which is their trading division. Wow, from a loss of $6.4 billion to a gain of $2.8B.
So if I understand this correctly, the American taxpayer gives Citi $45 billion in taxpayer funds and they manage to make $2.8 billion with a phone in each ear and yelling "buy!" , "sell!" across the room. Sounds like a long term strategy, if only they can keep those taxpayers priming the pump.
But I must say, my favorite part of the Citibank result is $2.5 billion they made just for being a lousy company. After Goldman Sachs misplaced the month of December in their recent results, Citi's accounting slight of hand seems almost normal. Because Citi debt has been justifiably savaged by the market it could buy back their own debt (taypayers need to step up again?) and book a $2.5 billion gain. Sounds like a nifty plan. Issue debt, run the company into the ground, say the debt is barely worth having and book a profit. Now if the financial system would just admit the mortgages they hold aren't worth what they say, wouldn't the national quarterly report look a lot better too? I know my P&L would.
John Barnyak
President
www.stonehouseasset.com
