This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Citigroup Is the New Bank of America

Stocks in this article: C BAC JPM

"We believe significant capital returns remain a matter of when, not if. While we believe that the Fed's objection to C's 2012 capital return plan is embarrassing, it is likely not indicative of an underlying capital problem," Sandler O' Neill analyst Jeffrey Harte wrote in a report. "We continue to expect C to generate more than $60B of excess regulatory capital over the next few years and to return the vast majority of that regulatory capital to shareholders."

Is Citi Still Too Risky?

But what is troubling is the Fed's calculation of theoretical losses at Citigroup in the event of a severe economic downturn.

Several analysts noted that the Fed seems to have taken a much harsher view of Citigroup relative to peers and relative to the bank's own historical loan loss experience.

Its projections even seems to have taken the bank by surprise. "We plan to engage further with the Federal Reserve to understand their new stress loss models. We strongly encourage the public release of these models and the associated benchmarks and assumptions," the bank said in a statement following the results.

Projected loan losses at Citigroup in the hypothetical supervisory stress scenario stood at $50.3 billion, in line with Bank of America's projected loss of $51.3 billion. But projected loss rates across portfolios at Citigroup are actually much steeper. For instance, projected loan losses as a percent of average loan balances is 11.2% at Citigroup versus 8.3% at Bank of America.

Analysts attribute some of the higher loss projections to the Fed's somewhat more conservative view on international consumer loans. The projected loss rate for "other consumer" loans at Citigroup is 23.4% for instance, versus 5.6% at Bank of America and 5.9% on an average for the 19 bank holding companies.

Citi's international presence has often been touted as its biggest advantage over its rivals, so the fact that its global business is viewed as a big risk is disconcerting to say the least.

But analysts don't know quite what to make of the Fed's projections. "In general loss estimates in the supervisory stress scenario appeared high, and in some cases, arbitrary and difficult to reconcile by bank," wrote Moshe Orenbuch at Credit Suisse.

2 of 3

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,804.80 +26.65 0.15%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs