Citigroup memo: We're doing swell
NEW YORK -- "We are having our best quarter-to-date performance since the third quarter of 2007," Pandit said in the memo obtained by USA TODAY.
If Citi is profitable in the first quarter as Pandit indicated, it would be the bank's first profit after five quarters of bruising losses totaling $32 billion. Stung by a collapse in the real estate and credit markets and its own poor investment decisions, Citi's stock was clobbered — falling 97% from over $40 in October 2007 to dip below $1 in recent days.
On Tuesday, Citi shares soared 38% to $1.45, lifting other financials and helping ignite a broad rally. Among other banks, JPMorgan Chase rose 23% and Bank of America 28%.
But veteran banking investors were skeptical about making too much of Pandit's cheerful assessment, which came less than two weeks after the U.S. government acquired a 36% stake in the bank following two other federal bailouts totaling $45 billion in less than five months.
"Two months does not a trend make," says Eric Boyce, portfolio manager at Hester Capital Management. Boyce says he finds it hard to believe the bank has had such a stark reversal of fortune given all the adverse trends in the financial markets. Continued weakness in real estate and in consumer finance will mean that "the entire financial services industry has a long way to go before it gets to solid footing, and that includes Citi," he says.
Pandit's memo said Citi's revenue in January and February was $19 billion, just shy of the quarterly average revenue in 2008 of $21 billion, excluding asset write-downs. He also said his bank has sharply reduced its risky assets and boosted its reserves for loan losses. Pandit expressed confidence that Citi will pass the "stress test" that the U.S. government will administer on large banks.
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