Citigroup: Earnings Winner

NEW YORK ( TheStreet) -- Citigroup ( C) was the winner among large U.S. banks on Monday, with shares rising over 2% to close at $51.81.

The broad indices ended Monday's session with slight gains, but the KBW Bank Index ( I:BKX) was up 0.6% to close at 64.85, with all but six of the 24 index components showing gains.

Citigroup was the latest money center bank to announce its second-quarter results, with earnings of $4.2 billion, or $1.34 a share, increasing from $3.8 billion, or $1.23 a share, in the first quarter, and $2.9 billion, or 95 cents a share, during the second quarter of 2012.

Excluding credit valuation adjustments (CVA) and debit valuation adjustments (DVA), earnings came in at $3.9 billion, or $1.25 a share, declining from $4.0 billion, or $1.29 a share the previous quarter. Operating earnings were up 25% from $3.1 billion, or $1.00 a share, during the second quarter of 2012, excluding CVA/DVA and also excluding a loss during the second quarter of 2012 tied to the sale of the company's stake in Akbank.

Again excluding CVA/DVA, Citi's total second-quarter revenue was $20.0 billion, up 8% year-over-year.

Analysts polled by Thomson Reuters had estimated Citi would post second-quarter earnings of $1.19 a share on revenue of $19.75 billion.

Atlantic Equities analyst Richard Staite in a note following the earnings release wrote "the beat versus consensus was driven by low net charge-offs of loans and a good performance in Securities and Banking. The results compared favorably against JPM with tangible book value per share increasing by 1.4% to $53.10 and the Basel III ratio improving to 10.0%."

Citigroup's estimated Basel III Tier 1 common equity ratio of 10.0% puts the company in full compliance with the Federal Reserve's minimum requirement of 7.0% plus an additional 2.5% buffer as a global systemically important financial institution (GSIFI) years ahead of the January 9.5% several years ahead of the January 2019 due date.

Citigroup also estimated that its Basel III supplementary Tier 1 leverage ratio was 4.9% as of June 30, putting it close to full compliance with federal regulators new minimum requirement of 5% for holding companies, ahead of a January 2018 deadline. Citi estimated its main banking subsidiary was already in compliance with a 6% Basel III supplementary Tier 1 leverage ratio minimum requirement.

When comparing Citigroup's results against JPMorgan Chase's ( JPM) results, Staite emphasized second-quarter net interest margin of 2.82%, which was down from 2.95% the previous quarter. JPMorgan's second-quarter net interest margin was 2.20%, falling from 2.37% the previous quarter.

Continuing the comparisons with JPMorgan, Staite pointed out that Citi's banking and securities revenues were up 21% year-over-year, compared to a still-solid 16% for JPMorgan.

Staite rates Citigroup "overweight" with a price target of $59, estimating the company will earn $4.94 a share this year, increasing to $5.89 in 2014.

C Chart C data by YCharts

Interested in more on Citigroup? See TheStreet Ratings' report card for this stock.

RELATED STORIES:







-- Written by Philip van Doorn in Jupiter, Fla.

>Contact by Email.

Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.

More from Investing

Video: Jim Cramer on Advanced Micro Devices, Chipotle and Southwest Airlines

Video: Jim Cramer on Advanced Micro Devices, Chipotle and Southwest Airlines

Bank of America's Latent Bond Losses Swell as Interest Rates Rise

Bank of America's Latent Bond Losses Swell as Interest Rates Rise

Jim Cramer: Advanced Micro Devices CEO Lisa Su Saved the Company

Jim Cramer: Advanced Micro Devices CEO Lisa Su Saved the Company

Intel's First-Quarter Earnings Report: 4 Key Metrics to Pay Attention To

Intel's First-Quarter Earnings Report: 4 Key Metrics to Pay Attention To

UPS Has Plans to Deliver Shareholders a Higher Stock Price

UPS Has Plans to Deliver Shareholders a Higher Stock Price