Is Citigroup (C) failing? (2024)

America’s third-largest bank, Citigroup (C), is losing money. Citi reported a quarterly net loss of -$1.81 billion in December 2023.

Furthermore, Citi’s quarterly income fell by -181.28% from $2.51 billion in December 2022. Similarly, Citi’s quarterly revenues fell by 9.95% from $16.63 billion in December 2022 to $14.97 billion in December 2023. Consequently, Citi had a net profit margin of -12.29 in December 2023.

Meanwhile, Citi’s quarterly operating expenses grew by 20.90% from $12.885 billion in December 2022 to $16.29 billion in December 2023. Thus, Citi is spending more money and making less money.

How Much Cash is Citi (C) generating?

Citi (C) does not quarterly report cash flow figures for December 2023. However, Citi’s cash from operations grew by 894.47% from -$125.447 million in September 2022 to $15.79 billion in September 2023.

However, Citi is paying off an enormous amount of debt. It reported -$43.97 billion in cash from financing in September 2023. This led to a -$42.92 billion net change in cash between September 2022 and September. Similarly, cash from investing was -$12.71 billion in September 2022.

Yet, Citi still has enormous amounts of cash. It reported $1.01 trillion in cash and short-term investments in December 2023. The cash and short-term investments shrank by -1.48% from $1.02 billion in December 2022.

Conversely, Citi has fewer liabilities. The total liabilities fell by -0.71% from $2.21 trillion in December 2022 to $2.2 trillion in December 2023.

However, Citi has less value. Its Total assets fell by -0.47% from $2.42 trillion in December 2022 to $2.2 trillion in December 2023.

Why is Citi (C) losing value?

Slowing loan growth, rising interest rates, and inflation are among the causes of Citigroup’s groups losses.

Citi executives expect big credit losses, CNBC reports. They set $1.85 billion aside to cover credit losses in the fourth quarter of 2023. Citi has also budgeted $640 million to cover “unfunded commitments” at its private bank.

One cause of Citi’s problems is foreign loans to questionable governments. For example, Citigroup (C)admits to losing $880 million when they devalued the Argentine peso in the fourth quarter of 2023. Similarly, Citi has a $1.3 billion transfer risk associated with Russia and Argentina.

Interest rates are hurting Citigroup. Its cost-of-credit rose from $1.8 billion in the fourth quarter of 2022 to $3.5 billion in the fourth quarter of of 2023. Credit card net losses drove the cost of credit up as credit card expenses returned to their pre-Covid levels, a Citigroup press release admits.

Citigroup (C) has more credit losses and bad loans

Plus, the allowance for credit losses rose from $19.4 billion in the fourth quarter of 2022 to $21.8 billion the fourth quarter of 2023. The allowance for credit losses on loans rose from $17.01 billion in the fourth quarter of 2022 to $18.1 billion in the fourth quarter of 2023.

Frighteningly, the number of non-accrual loans, bad loans, at Citigroup grew by 31% between the fourth quarter 2022 and the fourth quarter 2023 to $3.2 billion a year later. Notably, Citibank’s corporate non-accrual loans grew by 68% to $1.9 billion in the fourth quarter of 2023. Consumer non-accrual loans were stable at $1.3 billion.

“Non-accrual loan is an accounting term in the lending industry for an unsecured loan that is no longer generating its stated interest rate because no payment has been made by the borrower for over 90 days,” Investopediaexplains. Hence, Citigroup is not making money from the loans because nobody is making payments.

Paranoid observers will wonder if a banking crisis or collapse is beginning at Citigroup (C). Large numbers of non-accrual loans can mark the beginning of a banking crisis. For example, the 2008 financial meltdown began when thousands of people stopped making mortgage payments.

Citibank’s press release shows many corporate borrowers are not paying their loans, which indicates those businesses are not making money. Thus, a commercial lending crisis could be starting.

Is Citigroup (C) failing?

Frighteningly, 2023 was the biggest year ever for bank failures, American Banker observes.

The 2023 crisis began went Silicon Valley Bank collapsed in March. Strangely, it had been over 28 months since a US bank failure. I imagine all the money federal government pumped into the economy during the COVID-19 pandemic prevented collapses.

Silicon Valley Bank’s collapse was the largest US bank collapse in a second year because SVB had $548.7 billion in combined assets when it fell. The second largest bank failure in US history, First Republic Bank, also occurred in 2023. Other banks liquidated in 2023 include Silvergate Bank and Signature Bank.

The Biggest Bank Failure in American History

Citigroup’s failure could be the largest in US history because it had $2.2 trillion in asses in December 2023. Hence, Citigroup (C)is obviously too big to fail. The federal government will have to bail Citi out if it fails.

A Citi collapse could be catastrophic because it claims to have 200 million accounts in 160 countries. Citibank has 666 branches in 13 US states and 281 foreign locations, The FDIC estimates.

Thus, aCitigroup (C)collapse will hurt millions of people and thousands of businesses. I think such a collapse could cause a stock market collapse. For example, the Dow Jones Industrial Average fell by 778.68 points on 29 September 2008 during the last financial crisis.

This crash occurred because Congress rejected the Emergency Economic Stabilization Act of 2008 or bank bailout bill. The Dow Jones fell by over 50% between 9 October 2007 and 5 March 2009, The Balanceestimates.

Thus, we need to watch Citigroup closely because its problems could threaten the entire economy and the market.

Is Citigroup (C) a Value Investment?

Interestingly, Mr. Market gives Citigroup (C)more value as it loses money. For example, its share price rose from $38.93 on 30 October 2023 to $55.54 on 2 February 2024. However, the share price rose from $52.22 on 2 February 2023.

Observers could call Citigroup value investment because it is a $55.54 stock with $1.01 trillion in cash and short-term investments and $2.2 trillion in total assets.

Furthermore, Citigroup (C) has scheduled nine 53¢quarterly dividends between 23 February 2024 and 24 February 2026. Overall, Citigroup shares were offering a $2.12 forward dividend and a 3.81% forward dividend yield.

However, I think there are better bank socks thanCiti (C)out there. Better bank stocks include BNYMellon (BK), and JPMorgan Chase (JPM).