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Posted

I honestly don't know.

It use to sell at multiples of book value but that won't ever happen again.

It probable sold around the same multiple of bac and jpm pre 08.

Posted

Comparing multiples to book or tangible book may not be the best alternative for Citi right now. If you instead look at price to basel 3 tier 1 capital used at Citicorp (i.e. excluding Holdings) and compare that to BAC and JPM, they are very similar (1.4x in all 3 cases). This makes sense considering that capital tied up at Holdings has a negative return now. However, this ignores the high probability that Holdings will break even in the near term as well as the pace of capital build up at Citicorp from earnings, DTA use and decline in Holdings RWA. Citi is on its way to massive over capitalization in the next 2-4 years and the stock price doesn't reflect it. This is perhaps reasonable given Citi's performance in the 2012 ccar (who knows if shareholders will get their hands on that excess capital) but it sill ignores the ~20% annual growth in basel 3 tier 1 capital that Citicorp can achieve in the next 3 years just by staying the course (i.e. using Wall Street consensus numbers, which assume modest earnings growth).

 

As a side note my work relates to investing in EM and I'm from Argentina. The issues going on there are specific to the country, I don't think the chances of contagion are high, but we'll see.

Posted

"Comparing multiples to book or tangible book may not be the best alternative for Citi right now. If you instead look at price to basel 3 tier 1 capital used at Citicorp (i.e. excluding Holdings) and compare that to BAC and JPM, they are very similar (1.4x in all 3 cases). This makes sense considering that capital tied up at Holdings has a negative return now. However, this ignores the high probability that Holdings will break even in the near term as well as the pace of capital build up at Citicorp from earnings, DTA use and decline in Holdings RWA. Citi is on its way to massive over capitalization in the next 2-4 years and the stock price doesn't reflect it. This is perhaps reasonable given Citi's performance in the 2012 ccar (who knows if shareholders will get their hands on that excess capital) but it sill ignores the ~20% annual growth in basel 3 tier 1 capital that Citicorp can achieve in the next 3 years just by staying the course (i.e. using Wall Street consensus numbers, which assume modest earnings growth).

 

As a side note my work relates to investing in EM and I'm from Argentina. The issues going on there are specific to the country, I don't think the chances of contagion are high, but we'll see."

 

Thanks for your comments.

 

I've seen estimates for 25 cent dividend and 5-7 billion in buybacks in March.

They are estimating roa of 90-110 by next year so I'm assuming assuming holdings will be at break even by late next year.

2015 and beyond ccar should be very attractive.

Posted

Don't forget, C has about $2B in preferred which they can call.  I am assuming those will be called as part of this CCAR results as they have been improving their funding model. 

 

Tks,

S

Posted

I honestly don't know.

It use to sell at multiples of book value but that won't ever happen again.

It probable sold around the same multiple of bac and jpm pre 08.

 

It sold for about 10x earnings in 2006/2007.  I remember this well because Bill Miller was spotlighted in a Morningstar article/interview where he was saying that if he wanted to own a commodity, it would be "C".  Commodities at the time were hot and he thought he was clever buying C because of the low P/E.

 

Banks like C and BAC today achieve their earnings with far less risk compared to then, and consequently I think there should be a risk/adjusted increase in the market P/E for the same dollar of earnings. 

 

The market will value banks based on earnings, not book values, and they will assign a P/E based on what amount of risk achieves those earnings.

 

So far the biggest risk I've seen for a bank is the dilution risk (that is, if they can even raise capital -- I'm talking about the risks to the banks that don't completely go under) -- most of the hit to C and BAC's stock price since 2007 has come from dilution, not loan losses (helped by the fact that "bailouts"/intervention let them survive).  So now that they hold a lot more capital (and they are forced to do so by the regulators), that risk is massively reduced.  Needless to say, their funding models are also much cleaner (greater reliance on deposits instead of wholesale funding and LT debt).  And risk has been reduced in many other ways (better terms on loans, better collateral backing RE loans).

 

Nobody can argue that $1 of earnings achieved in a high risk manner will get the same market multiple as $1 of earnings achieved in a relatively far less risky manner.

 

Posted

I should probably turn my Ira over like Eric.

Watching citi everyday is distracting me from my work.

Down every day for two weeks. About 16 percent discount to tangible book.

New ism number out and below expectations.

Dimon, Moynihan, etc all think 3 percent GDP this year. IMF thinks global growth will increaese. disconnect to everyone saying economy is improving with 1200 point sell off in last couple of weeks.

 

Posted

My friend, stocks go up and down and take time for the thesis to play out.  Right now we seem to be in the middle of a correction so this is the perfect opportunity to load up!

 

"The big money is not in the buying and selling … but in the waiting. " - Charlie Munger

 

Tks,

S

 

I should probably turn my Ira over like Eric.

Watching citi everyday is distracting me from my work.

Down every day for two weeks. About 16 percent discount to tangible book.

New ism number out and below expectations.

Dimon, Moynihan, etc all think 3 percent GDP this year. IMF thinks global growth will increaese. disconnect to everyone saying economy is improving with 1200 point sell off in last couple of weeks.

Posted

Hey, don't feel bad about owning Citi today.  At least you didn't own Berkshire (down slightly more than Citi).

 

MBI did great though.  Some analyst mentioned that Puerto Rico downgrade won't be so bad.

Posted

Today, C out-performed BAC, this happen rarely, as u know, BAC is considered a must have for many funds now.

 

I just don't see what is C's competitive advantage. I'll post in another thread.

Posted

Didn't buy it but am seriously looking at ASCMA, a john malone step child.  It looks like it has about a 14% FCF yield and has been growing 30-40% per year.  I am just not sure why it has plunged so much recently, I think it is down over 20% in the past couple of weeks on no news. 

 

Anyone have any opinions on it?

Posted

No, ascent capital group.  It's basically a holding company that buys home security companies.  It appears very cheap on most metrics but with the recent price slide and so little news I wonder if I am just missing something.

Posted

ASCMA looks interesting. Lunch, do you know what they're investing in? Are they acquiring a lot of companies or just stakes? They invested the equivalent of their market cap in 2012.

Posted

For anyone willing to take a risk of a Chinese company, SORL looks too good to be true and getting cheaper. A PE of 6, EV/EBITDA of 3, growing earnings, growing revenue, generating cash. Makes brakes/safety components for buses/trucks. Didn't buy it but am considering a small portion. Still need to read a lot more into it. Downturn in China is my biggest fear in general.

Posted

 

"Banks like C and BAC today achieve their earnings with far less risk compared to then, and consequently I think there should be a risk/adjusted increase in the market P/E for the same dollar of earnings. "

 

Bac is getting it at 12x earnings but nobody wants citi around 9x earnings.

At least for now.

I'm a bit surprised still no ccar date release.

Last two years fed published around jan 29th.

Maybe they won't do the two step release and they just announce all at once on march 7th.

Posted

Didn't buy it but am seriously looking at ASCMA, a john malone step child.  It looks like it has about a 14% FCF yield and has been growing 30-40% per year.  I am just not sure why it has plunged so much recently, I think it is down over 20% in the past couple of weeks on no news. 

 

Anyone have any opinions on it?

 

the plunge is due to ADT results that show an increase in the churn and more competition.

Steady free cash flow is 193 m$ less 100m$ min interest cost=93 m$. So free cash flow is more 10 % than 14 %

it's growing 30 % to 40 % including acquisitions

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