Magic Markets

Magic Markets #158: Citigroup and Bank of America


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This episode of Magic Markets is brought to you by data and process automation specialists B2IT. The company makes robots so that people don’t have to be robots. If you hate it, automate it by visiting the B2IT website.

With US earnings season underway and the most famous Wall Street banks having released results, we couldn’t resist digging into two such banks and the recent earnings. Instead of picking the obvious ongoing winner JPMorgan, we decided to delve into Bank of America and Citigroup instead.

At Bank of America, earnings are down sharply year-on-year. If you dig more deeply, you find that once-off charges plagued the numbers. We’ve seen this across several of the banks in this reporting cycle. There’s also been a negative impact from Bank of America having piled into long-dated securities during the pandemic. Time has proven this to be the wrong strategy. As part of his review of the results, Moe also dealt with credit loss provisioning and various other important metrics at the bank.

The Finance Ghost tackled Citigroup, where they can only dream of having positive earnings. It’s all about the restructuring process and a significant decrease in headcount. This makes for ugly headlines and pretty share price charts, at least over the past few months as the market started to get excited about the turnaround. Citigroup has been restructured into five business units and some of them are real laggards in the market. They have some excellent businesses as well, like the Treasury and Trade Solutions (TTS) operation that Citi is best known for. Thanks to the restructure, there’s now visibility on all of this.

And for a very unexpected conclusion, Ghost reckons that perhaps the best exposure you can take to financial services is by buying a technology company instead!

If you enjoy learning about the strategies used by global companies, then you’ll love Magic Markets Premium with a library of over 100 reports and podcasts with even more detail and depth. You can get access to all our work for just R99/month at this link.

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Magic MarketsBy The Finance Ghost and Moe-Knows

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