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Citigroup: Still A Sell

Last week’s earnings report sent shares of Citigroup up 3%, but the rally was short-lived. And rightly so.

The seemingly impressive numbers, at a closer glance, were tempered by an unimpressive reality.

Net income rose 24% in the second quarter, but that was as loan loss provisions declined (those loan loss reserves comprised two-thirds of profits reported, according to MarketWatch). And the problem is that’s a source that will evaporate.

Revenue rose 5% over the first quarter…but on an annual basis revenue fell 7%. And expenses rose 7%, year-on-year.

And at Citicorp (the division Citigroup is working to grow), revenue fell (though moderately at less than 1%).

But we don’t need an earnings report to know that Citigroup is not a buy. The stock is down 19% year-to-date, and is a long-term sell. And while shares were somewhat overpunished last week as the market reacted to the details of the earnings report, I would not consider that a buying opportunity.


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