Citigroup Inc.

– 2015
Forest R. David

A. Case Abstract

Citigroup is a leading global bank holding financial institution with more than 16,000 offices and
225,000 employees worldwide. Citigroup is the world’s largest credit card issuer with over 900 million
retail accounts with various well-known brands. Headquartered in Manhattan, New York, Citigroup
has two major segments, Citicorp and CitiHolding, within four major regions of Latin America, North
America, Asia, and EMEA (Europe and Middle East and Africa). The main segment is Citicorp.
Citicorp has the following two major divisions: Global Consumer Banking (GCB) and Institutional
Clients Group (ICG). The GCB segment offers traditional banking services such as lending and credit
cards to individuals and small businesses. In contrast, the ICG segment services institutional, public
sector, and high-net-worth clients, including such products and services as fixed income and equity
sales and trading, foreign exchange, prime brokerage, derivative services, equity and fixed income
research, corporate lending, investment banking and advisory services, private banking, cash
management, trade finance, and securities services.

 
B. Vision Statement  (proposed)  
 
Our vision is to become world’s largest and best bank holding company providing all banking and
financial products and quality services to individuals, businesses, communities, institutions, and
nations globally.

C. Mission Statement (proposed)  

We work tirelessly to serve individuals, businesses, communities, institutions and nations (1) globally
(3) with 200 years of experience. Our highly recruited and talented employees (9) offer a diverse
portfolio of banking and financial solutions (2) that are simple, creative, and responsible (6, 7).
Citigroup continues to grow (5) by providing modern digital banking technology options (4) through
mobile banking, mobile deposits, and online bill pay. We enhance the lives of our communities (8)
with teamwork from Citi Foundation. (69 words)

1. Customers
2. Products or services
3. Markets
4. Technology
5. Concern for survival, growth, and profitability
6. Philosophy
7. Self-concept
8. Concern for public image
9. Concern for employees
 
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D. External Audit
Opportunities

1. Emerging markets for potential growth. Estimates 2.2 billion out of 2.5 billion people globally
who do not use a bank live in Africa, Asia, Latin America, and the Middle East.
2. The US Federal Reserve is expected to raise rates in late 2015 or 2016.
3. Efficiency ratios (non interest expense / net revenues) are a key driver for bank profitability during
periods of low rates with the lower percentage the better.
4. JP Morgan and Bank of America have engaged heavily in retrenchment strategies over the last 5
years.
5. Fixed income and other interest producing assets are leading to higher returns despite the low
interest rate environment.
6. Being less dependent on international finance results in significantly lower capital requirements.
7. Industry-wide $16 billion in home equity loans where consumers are only paying interest amortize
between 2015 and 2017. When adding in the new principal payments, monthly payments will rise
165%.
8. Many interest-only loans will be refinanced by banks offering the best terms.
9. Block trades often help land other business such as merger advisory and increase trading volume.
Experts suggest even if you lose on the single transaction the net benefit could be greater.
10. There are growing numbers of super-rich people in the world; banks are now targeting them to
help finance many projects that once were only financed by large institutions.

Threats

1. Senator Elizabeth Warren stated in December 2014, that Citi was bailed out with half a trillion
dollars of taxpayer money, and then used their fortunes to buy Congress, and make it more likely
they will be bailed out again.
2. JP Morgan and Bank of America reported higher net income and revenue than Citi in 2015.
3. Wells Fargo and Bank of America have started to waive ATM fees.
4. Increased competition from rivals on branches and ATM locations. Wells Fargo - 9,000/12,000
and JP Morgan – 5,614/18,699.
5. Yield curve in the US remains fairly flat with low rates on both short- and long-term options.
6. Europe, Japan, Australia and other regions of the world are expected to extend quantitative easing
measures.
7. Wells Fargo was the only bank to achieve an increase in Q3 revenues from 2014 to 2015 at 3.2%,
thanks in large part to being more focused on consumer and commercial banking than trading
operations.
8. Trading income from currencies and securities has severely hurt banks over 2015.
9. Wells Fargo’s fixed income and interest operations resulted in a 4.7% increase year-over-year
from Q3 2014 to Q3 2015.
10. Wells Fargo could overtake Citi as the third largest bank in the US by late 2016 based on total
assets.

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 Competitive Profile Matrix

JP Morgan
Citigroup Wells Fargo
Chase & Co.
Critical Success Factors Weight Rating Score Rating Score Rating Score
Advertising 0.05 4 0.20 3 0.15 2 0.10
Customer Loyalty 0.10 3 0.30 4 0.40 2 0.20
Customer Service 0.10 3 0.30 4 0.40 2 0.20
Diverse Financial Solutions 0.15 4 0.60 2 0.30 3 0.45
Global Presence 0.09 4 0.36 1 0.09 3 0.27
Financial Position 0.10 3 0.30 4 0.40 2 0.20
Digital Technology 0.20 3 0.60 4 0.80 2 0.40
Bank Charges/Fees 0.08 2 0.16 4 0.32 3 0.24
Percent US Focused 0.08 3 0.24 4 0.32 2 0.16
Market Capitalization 0.05 2 0.10 4 0.20 3 0.15
Totals 1.00 3.16 3.38 2.37
 

Citi is performing relatively well on the CPM but Wells Fargo has the highest total score due in part to
Wells Fargo’s focus on the US markets and less focus on trading of securities. In addition, Wells
Fargo has no long-term debt and relatively little goodwill. Citigroup may need to divest its operations
in poorer performing markets outside the US.

EFE Matrix

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 Opportunities Weight Rating Weighted Score
1. Emerging markets for potential growth. Estimates 2.2 billion out
of 2.5 billion people globally who do not use a bank live in 0.03 3 0.09
Africa, Asia, Latin America and the Middle East.
2. The US Federal Reserve is expected to raise rates in late 2015 or
0.03 2 0.06
2016.
3. Efficiency ratios (non interest expense / net revenues) are a key
driver for bank profitability during periods of low rates with the 0.06 4 0.24
lower the percentage the better.
4. JP Morgan and Bank of America have engaged heavily in
0.04 2 0.08
retrenchment strategies over the last 5 years.
5. Fixed income and other interest producing assets are leading to
0.06 3 0.18
higher returns despite the low interest rate environment.
6. Being less dependent on international finance results in
0.05 2 0.10
significantly lower capital requirements.
7. Industry-wide $16 billion in home equity loans where consumers
are only paying interest amortize between 2015 and 2017. When
0.05 3 0.15
adding in the new principle payments, monthly payments will
rise 165%.
8. Many interest-only loans will be refinanced by banks offering
0.05 2 0.10
the best terms.
9. Block trades often help land other business such as merger
advisory and increase trading volume. Experts suggest even if
0.06 2 0.12
you lose on the single transaction the net benefit could be
greater.
10. There are growing numbers of super-rich people in the world;
banks are now targeting them to help finance many projects that 0.03 3 0.09
once were only financed by large institutions.

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 Threats Weight Rating Weighted Score
1. Senator Elizabeth Warren stated in December 2014, that Citi was
bailed out with half a trillion dollars of taxpayer money, and then
0.04 2 0.08
used their fortunes to buy Congress, and make it more likely
they will be bailed out again.
2. J. P. Morgan and Bank of America reported higher net income
0.08 1 0.08
and revenue than Citi in 2015.
3. Wells Fargo and Bank of America have started to waive ATM
0.03 1 0.03
fees.
4. Increased competition from rivals on branches and ATM
locations. Wells Fargo - 9,000/12,000 and JPMorgan œ 0.03 2 0.06
5,614/18,699.
5. Yield curve in the US remains fairly flat with low rates on both
0.11 2 0.22
short and long term options.
6. Europe, Japan, Australia and other regions of the world are
0.04 2 0.08
expected to extend quantitative easing measures.
7. Wells Fargo was the only bank to achieve an increase in Q3
revenues from 2014 to 2015 at 3.2%, thanks in large part to being
0.07 2 0.14
more focused on consumer and commercial banking than trading
operations.
8. Trading income from currencies and securities has severely hurt
0.05 2 0.10
banks over 2015.
9. Wells Fargo‘s fixed income and interest operations resulted in a
0.05 2 0.10
4.7% increase year-over-year from Q3 2014 to Q3 2015.
10. Wells Fargo could overtake Citi as the 3rd largest bank in the US
0.04 2 0.08
by late 2016 based on total assets.
TOTALS 1.00 2.18

Citigroup is performing below average addressing its external issues. A weak block security
trading market, low interest rates, and weak international markets have hurt the firm significantly.
Despite low interest rates, fixed income has been the best option for banks over the last few years.
Citi should work closely to expand its current credit card business as well as its home and auto
loans in the US until foreign markets and investment banking improve.

E. Internal Audit
Strengths

1. Citigroup is the largest banking enterprise in the world based on geographic coverage with operations
in 160 nations and over 16,000 offices.
2. Citigroup is world’s largest credit card issuer with over 900 million retail accounts with various well-
known brands.
3. In Q2 2015, Citi sold about $32 billion of the remaining assets in Citi Holdings, including OneMain
Financial, the largest business remaining in Citi Holdings.
4. Has about 90 million accounts including brands such as Home Depot, Macy’s, Sears, Shell, and others.
5. In Q3 2015, Citi’s legal expenses dropped to $376 million from $1.3 billion Q3 2014 resulting in a net
income increase of 51%.
6. Citi’s efficiency ratio dropped from 66% to 55% from Q3 2014 to Q3 2015.

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 7. In 2015, Citigroup sold its Japanese retail operations to Sumitomo Mitsui Banking Corp. for $400
million, ending this Citigroup problematic segment. With this divestiture, Citigroup gave up 740,000
customers in Japan.
8. Citi is scaling back block trades where they buy millions worth of securities just below the market and
try to quickly sell it back at the market price.
9. Citi plans to once again become heavy in block trading when the market improves.
10. Citi is offering deals to super-rich families to invest in large projects such as the tallest residential
tower in Manhattan, Hooters hotel and casino in Las Vegas, tall residential buildings in Boston, and
others.

Weaknesses

1. Citigroup does not have a publicly available mission or vision statement.

2. Citigroup incurred charges of $3.5 billion Q4 of 2014 to cover legal and restructuring costs. The bank
allocated $2.7 billion of that amount to cover legal costs associated with investigations into currency
trading, the manipulation of a key interest rate, as well as anti-money laundering and related probes.
3. Fraud issues in the past affect credibility of Citigroup, with $400 million stolen in Mexico and multiple
high-level positions at Banamex terminated.
4. Citi’s Q3 2015 revenues were 5% lower than Q3 2014.
5. Retrenchment strategies at Citi partly resulted in a 4.4% decline in earnings from Q3 2014 to Q3 2015,
the largest drop of any of the 4 big US banks.
6. Citi’s fixed income and interest operations resulted in a 3.4% drop year-over-year from Q3 2014 to Q3
2015.
7. Being focused heavily on international markets, Citi’s capital requirements are expected to rise 3.5% in
2016.
8. Citi’s stock price as of late 2015 is 0.84x of book value according to many analysts.
9. Citi is currently attempting to ramp up its stock trading business by courting hedge fund managers.

Financial Ratio Analysis

Citigroup Wells Fargo

Current Ratio 0.36 0.51
Quick Ratio 0.36 0.51
Long Term Debt / Equity 1.72 0.00
Inventory Turnover NA NA
Total Assets Turnover 0.04 0.05
Accounts Receivable
Turnover 2.44 NA
Average Collection Period 149.75 0.00
Net Profit Margin 11% 26%
Return on Total Assets (ROA) 0% 1%
Return on Equity (ROE) 3% 13%

Wells Fargo is performing significantly better than Citigroup on both net profit margins and ROE. In
addition, Wells Fargo has no long-term debt on its balance sheet. Citigroup is slowly improving its position
as many litigation fees have been paid and as the firm moves away from trading of securities as heavily as
it has historically.

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 Net Worth Analysis (in millions)

Citigroup

Stockholders' Equity - (Goodwill + Intangibles) $210,534

Net Income x 5 $36,565
(Share Price/EPS) x Net Income $87,261
Number of Shares Outstanding x Share Price $158,421
Method Average $123,195

Wells Fargo

Stockholders' Equity - (Goodwill + Intangibles) $184,394

Net Income x 5 $115,285
(Share Price/EPS) x Net Income $292,724
Number of Shares Outstanding x Share Price $268,476
Method Average $215,220

While Citigroup may be more closely related to JP Morgan or Bank of America in how it allocates
resources and conducts business, Wells Fargo clearly has the best competitive advantage of the 4 with its
US focus and relatively little focus on securities and trading. The net worth analysis reveals Wells Fargo is
worth significantly more than Citigroup as a result.

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IFE Matrix

Strengths Weight Rating Weighted Score

1. Citigroup is the largest banking enterprise in the world based on
geographic coverage with operations in 160 nations and over 0.06 3 0.18
16,000 offices.
2. Citigroup is world‘s largest credit card issuer with over 900
0.08 4 0.32
million retail accounts with various well-known brands.
3. In Q2 2015, Citi sold about $32 billion of the remaining assets in
Citi Holdings, including OneMain Financial, the largest business 0.04 3 0.12
remaining in Citi Holdings.
4. Has about 90 million accounts including brands such as Home
0.06 4 0.24
Depot, Macys, Sears, Shell, and others.
5. In Q3 2015, Citi‘s legal expenses dropped to $376 million from
0.05 3 0.15
$1.3 billion Q3 2014 resulting in a net income increase of 51%.
6. Citi‘s efficiency ratio dropped from 66% to 55% from Q3 2014 to
0.05 3 0.15
Q3 2015.
7. In 2015, Citigroup sold its Japanese retail operations to
Sumitomo Mitsui Banking Corp. for $400 million, ending this
0.03 3 0.09
Citigroup problematic segment. With this divestiture, Citigroup
gave up 740,000 customers in Japan.
8. Citi is scaling back block trades where they buy millions worth of
securities just below the market and try to quickly sell it back at 0.04 3 0.12
the market price.
9. Citi plans to once again become heavy in block trading when the
0.04 3 0.12
market improves.
10. Citi is offering deals to suber rich families to invest in large
projects such as the tallest residential tower in Manhattan,
0.02 3 0.06
Hooters hotel and casino in Las Vegas, tall residential buildings
in Boston, and others.

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 Weaknesses Weight Rating Weighted Score
1. Citigroup does not have a publically available mission or vision
0.04 2 0.08
statement.
2. Citigroup incurred charges of $3.5 billion Q4 of 2014 to cover
legal and restructuring costs. The bank allocated $2.7 billion of
that amount to cover legal costs associated with investigations 0.05 1 0.05
into currency trading, the manipulation of a key interest rate, as
well as anti-money laundering and related probes.
3. Fraud issues in the past affect credibility of Citigroup, with $400
million stolen in Mexico and multiple high-level positions at 0.05 2 0.10
Banamex terminated.
4. Citi‘s Q3 2015 revenues were 5% lower than Q3 2014. 0.05 2 0.10
5. Retrenchment strategies at Citi partly resulted in a 4.4% decline
in earnings from Q3 2014 to Q3 2015, the largest drop of any of 0.05 2 0.10
the 4 big US banks.
6. Citi‘s fixed income and interest operations resulted in a 3.4%
0.08 2 0.16
drop year-over-year from Q3 2014 to Q3 2015.
7. Being focused heavily on international markets, Citi‘s capital
0.08 1 0.08
requirements are expected to rise 3.5% in 2016.
8. Citi‘s stock price as of late 2015 is 0.84x of book value according
0.05 1 0.05
to many analysts.
9. Citi is currently attempting to ramp up its stock trading business
0.08 1 0.08
by courting hedge fund managers.
TOTALS 1.00 2.35

Citigroup is also performing below average on addressing internal issues with an IFE score of 2.35.
Particularly troubling for Citi was the fraud scandal with Banamex in Mexico along with its poorly
performing investment banking business and Citi Holdings. Moving forward it is important that Citi
complete the divesture of OneMain Financial.

F. SWOT
SO Strategies

1. Increase credit card accounts by 40 million through offering attractive sign up bonuses at a cost of
$6 billion (S2, O2, O5).
2. Divest 20% of the poorest performing foreign markets (S7, O6).
3. Spend $50 million marketing to rich families to entice them to invest in large scale projects (S10,
O10).
4. Cut block trade volume by 20% through 2017 (S8, S9, O9).

WO Strategies
1. Spend $400 million advertising to refinance existing loans with Citi (W4, W5, W6, O2, O5, O7,
O8).
2. Ensure any investment in foreign markets more than accommodates for the 3.5% extra percentage
point requirements by the US government (W7, O6).
3. Invest an additional $400 million in emerging markets to ensure fraud is as limited as possible
(W2, W3, O1).
4. Divest 20% of the poorest performing foreign markets (W4, O6).

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 ST Strategies
1. Increase credit card accounts by 40 million through offering attractive sign up bonuses at a cost of
$6 billion (S2, T2, T7, T9, T10).
2. Spend $2 billion to increase fixed income investments such as credit cards, and home and auto
loans (S1, T2, T7, T9, T10).
3. Spend $500 million on advertising that presents Citi as an ethical and responsible company (S1,
S4, T1).
4. Continue to divest markets such as Japan and parts of Europe where rates are expected to remain
lower than in the US for an extended period of time (S7, T6).

WT Strategies
1. Develop a formal vision and mission that clearly states what Citi wishes to accomplish and what
business they are focused on (W1, T2, T8).
2. Spend $2 billion to increased fixed income investments such as credit cards and home and auto
loans (W6, T2, T7, T9, T10).
3. Cut block trade volume by 20% through 2017 (W4, W9, T8).
4. Continue to divest markets such as Japan and parts of Europe where rates are expected to remain
lower than in the US for an extended period of time (W8, T6).

G. SPACE Matrix
FP
Conservative Aggressive
7

CP IP
-7 -6 -5 -4 -3 -2 -1 1 2 3 4 5 6 7
-1

-2

-3

-4 X = 1.8
Y = -1.2
-5

-6

-7
Defensive Competitive
SP

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 Internal Analysis: External Analysis:
Financial Position (FP) Stability Position (SP)
Debt Ratio 2 Competitive Pressure -7
Litigation Issues 2 Securities and Trading Business -6
Current Ratio 3 Interest Rates -2
EPS 6 Product Line Diversity -1
ROA 1 Government Regulations -4
Financial Position (FP) Average 2.8 Stability Position (SP) Average -4.0

Internal Analysis: External Analysis:

Competitive Position (CP) Industry Position (IP)
Credit Card Market Share -1 Growth Potential 5
US Market Share -3 Yield Curve 2
International Market Share -2 Ease of Entry into Market 4
Service Varity -2 Profit Potential 5
Use of Technology -2 Leverage 3
Competitive Position (CP) Average -2.0 Industry Position (IP) Average 3.8

Citi is in the Competitive Quadrant of the SPACE Matrix in part because the bank is “too big to fail” and
doing fairly well on its CP factors. The firm does need to improve its efficiency ratios moving forward
though, as competing on efficiency is especially important during times of low rates and poor investment
banking climate.

H. Grand Strategy Matrix

Rapid Market Growth

Quadrant II Quadrant I

Weak Strong
Competitive Competitive
Position Position

Citigroup

Quadrant III Quadrant IV

Slow Market Growth

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 The big banks are clearly in a mode of slow market growth. JP Morgan and Bank of America reported
lower revenues in 2014 than in 2013, and Wells Fargo and Citigroup reported slightly higher revenues in
2014. Citi is also plagued by its dependence on foreign markets, the securities and trading business, and
many legal and ethical issues that have resulted in significant fines. As Citi attempts to restructure with a
more US focus, and less dependence on securities and trading, the firm can likely quickly move into
Quadrant IV.

I. The Internal-External (IE) Matrix

The Total IFE Weighted Scores
Strong Average Weak
4.0 to 3.0 2.99 to 2.0 1.99 to 1.0
4.0 I II III

High

3.0 IV V VI

The 3
EFE
Total Medium
Weighted 4
Scores Citigroup

2.0 VII VIII IX

Low

1.0
 

Region 2014 Revenue 2014 Income

1. North America $31.9 B $8.3 B
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 2. EMEA $10.8 B $2.0 B
3. Latin America $13.4 B $2.5 B
4. Asia $14.6 B $3.6 B

Citi receives approximately half of its income from outside the US. Markets in EMEA
and Latin America are not performing nearly as well as North America and Asia. Not
revealed in the IE Matrix above is the segment data for Global Consumer Banking and
Institutional Clients Group, which reported 2014 revenues of $37.7 and $33.2 billion
respectively with income of $6.9 and $9.5 billion respectively. Citi Holdings lost $3.4
billion on $5.8 billion in revenue. Citi likely should continue to focus on the US and
Asian markets.

J. QSPM

Actively
Invest further
divest poorer
into fixed
performing
income
international
markets
markets
Opportunities Weight AS TAS AS TAS
1. Emerging markets for potential growth. Estimates 2.2 billion out
of 2.5 billion people globally who do not use a bank live in 0.03 1 0.03 4 0.12
Africa, Asia, Latin America and the Middle East.
2. The US Federal Reserve is expected to raise rates in late 2015 or
0.03 4 0.12 1 0.03
2016.
3. Efficiency ratios (non interest expense / net revenues) are a key 0.06 4 0.24 3 0.18
4. JP Morgan and Bank of America have engaged heavily in
retrenchment strategies over the last 5 years. 0.04 2 0.08 4 0.16

5. Fixed income and other interest producing assets are leading to

0.06 4 0.24 1 0.06
higher returns despite the low interest rate environment.
6. Being less dependent on international finance results in
0.05 1 0.05 4 0.20
significantly lower capital requirements.
7. Industry-wide $16 billion in home equity loans where consumers
are only paying interest amortize between 2015 and 2017. When
0.05 4 0.20 1 0.05
adding in the new principle payments, monthly payments will
rise 165%.
8. Many interest-only loans will be refinanced by banks offering
0.05 4 0.20 1 0.05
the best terms.
9. Block trades often help land other business such as merger
advisory and increase trading volume. Experts suggest even if
0.06 0 0.00 0 0.00
you lose on the single transaction the net benefit could be
greater.
10. There are growing numbers of super-rich people in the world;
banks are now targeting them to help finance many projects that 0.03 0 0.00 0 0.00
once were only financed by large institutions.

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 Threats Weight AS TAS AS TAS
1. Senator Elizabeth Warren stated in December 2014, that Citi was
bailed out with half a trillion dollars of taxpayer money, and then
0.04 0 0.00 0 0.00
used their fortunes to buy Congress, and make it more likely
they will be bailed out again.
2. J. P. Morgan and Bank of America reported higher net income
0.08 3 0.24 4 0.32
and revenue than Citi in 2015.
3. Wells Fargo and Bank of America have started to waive ATM
0.03 0 0.00 0 0.00
fees.
4. Increased competition from rivals on branches and ATM
locations. Wells Fargo - 9,000/12,000 and JPMorgan œ 0.03 0 0.00 0 0.00
5,614/18,699.
5. Yield curve in the US remains fairly flat with low rates on both
0.11 4 0.44 1 0.11
short and long term options.
6. Europe, Japan, Australia and other regions of the world are
0.04 2 0.08 4 0.16
expected to extend quantitative easing measures.
7. Wells Fargo was the only bank to achieve an increase in Q3
revenues from 2014 to 2015 at 3.2%, thanks in large part to being
0.07 0 0.00 0 0.00
more focused on consumer and commercial banking than trading
operations.
8. Trading income from currencies and securities has severely hurt
0.05 0 0.00 0 0.00
banks over 2015.
9. Wells Fargo‘s fixed income and interest operations resulted in a
0.05 4 0.20 1 0.05
4.7% increase year-over-year from Q3 2014 to Q3 2015.
10. Wells Fargo could overtake Citi as the 3rd largest bank in the US
0.04 0 0.00 0 0.00
by late 2016 based on total assets.

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 Actively
Invest further
divest poorer
into fixed
performing
income
international
markets
markets
Strengths Weight AS TAS AS TAS
1. Citigroup is the largest banking enterprise in the world based on
geographic coverage with operations in 160 nations and over 0.06 0 0.00 0 0.00
16,000 offices.
2. Citigroup is world‘s largest credit card issuer with over 900
0.08 4 0.32 1 0.08
million retail accounts with various well-known brands.
3. In Q2 2015, Citi sold about $32 billion of the remaining assets in
Citi Holdings, including OneMain Financial, the largest business 0.04 2 0.08 1 0.04
remaining in Citi Holdings.
4. Has about 90 million accounts including brands such as Home
0.06 0 0.00 0 0.00
Depot, Macys, Sears, Shell, and others.
5. In Q3 2015, Citi‘s legal expenses dropped to $376 million from
0.05 0 0.00 0 0.00
$1.3 billion Q3 2014 resulting in a net income increase of 51%.
6. Citi‘s efficiency ratio dropped from 66% to 55% from Q3 2014 to
0.05 3 0.15 4 0.20
Q3 2015.
7. In 2015, Citigroup sold its Japanese retail operations to
Sumitomo Mitsui Banking Corp. for $400 million, ending this
0.03 1 0.03 4 0.12
Citigroup problematic segment. With this divestiture, Citigroup
gave up 740,000 customers in Japan.
8. Citi is scaling back block trades where they buy millions worth of
securities just below the market and try to quickly sell it back at 0.04 0 0.00 0 0.00
the market price.
9. Citi plans to once again become heavy in block trading when the
0.04 0 0.00 0 0.00
market improves.
10. Citi is offering deals to suber rich families to invest in large
projects such as the tallest residential tower in Manhattan,
0.02 0 0.00 0 0.00
Hooters hotel and casino in Las Vegas, tall residential buildings
in Boston, and others.

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 Weaknesses Weight AS TAS AS TAS
1. Citigroup does not have a publically available mission or vision
0.04 0 0.00 0 0.00
statement.
2. Citigroup incurred charges of $3.5 billion Q4 of 2014 to cover
legal and restructuring costs. The bank allocated $2.7 billion of
that amount to cover legal costs associated with investigations 0.05 0 0.00 0 0.00
into currency trading, the manipulation of a key interest rate, as
well as anti-money laundering and related probes.
3. Fraud issues in the past affect credibility of Citigroup, with $400
million stolen in Mexico and multiple high-level positions at 0.05 0 0.00 0 0.00
Banamex terminated.
4. Citi‘s Q3 2015 revenues were 5% lower than Q3 2014. 0.05 2 0.10 3 0.15
5. Retrenchment strategies at Citi partly resulted in a 4.4% decline
in earnings from Q3 2014 to Q3 2015, the largest drop of any of 0.05 2 0.10 4 0.20
the 4 big US banks.
6. Citi‘s fixed income and interest operations resulted in a 3.4%
0.08 4 0.32 1 0.08
drop year-over-year from Q3 2014 to Q3 2015.
7. Being focused heavily on international markets, Citi‘s capital
0.08 1 0.08 4 0.32
requirements are expected to rise 3.5% in 2016.
8. Citi‘s stock price as of late 2015 is 0.84x of book value according
0.05 2 0.10 3 0.15
to many analysts.
9. Citi is currently attempting to ramp up its stock trading business
0.08 0 0.00 0 0.00
by courting hedge fund managers.
TOTALS 3.40 2.83

Investing further in fixed income markets wins out on the QSPM by a rather wide margin. Focusing on credit cards,
and car and home loans is likely a key area for Citi to consider. However, it is also important to continue to divest
poorer performing foreign markets, not only do they lose capital, but they are met with higher interest maintenance
requirements from the US.

K. Recommendations

1. Increase credit card accounts by 40 million through offering attractive sign up bonuses at a cost of $6
billion.
2. Divest 20% of the poorest performing foreign markets.
3. Cut block trade volume by 20% through 2017.
4. Spend $400 million advertising to refinance existing loans with Citi.
5. Ensure any investment in foreign markets more than accommodates for the 3.5% extra percentage
point requirements by the US government.
6. Invest an additional $400 million in emerging markets to ensure fraud is as limited as possible.
7. Spend $2 billion to increase fixed income investments such as credit cards, and home and auto loans.
8. Continue to divest markets such as Japan and parts of Europe where rates are expected to remain lower
than in the US for an extended period of time.
9. Develop a formal vision and mission that clearly states what Citi wishes to accomplish and what
business they are focused on.

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L. EPS/EBIT Analysis (in millions except for EPS and Share Price)
  Amount Needed: $8,800
Stock Price: $52.86
Shares Outstanding: 2,997
Interest Rate: 5%
Tax Rate: 39%

Common Stock Financing Debt Financing

Recession Normal Boom Recession Normal Boom
EBIT $20,000 $30,000 $40,000 $20,000 $30,000 $40,000
Interest 0 0 0 440 440 440
EBT 20,000 30,000 40,000 19,560 29,560 39,560
Taxes 7,800 11,700 15,600 7,628 11,528 15,428
EAT 12,200 18,300 24,400 11,932 18,032 24,132
# Shares 3,163 3,163 3,163 2,997 2,997 2,997
EPS 3.86 5.78 7.71 3.98 6.02 8.05

30 Percent Stock 70 Percent Stock

Recession Normal Boom Recession Normal Boom
EBIT $20,000 $30,000 $40,000 $20,000 $30,000 $40,000
Interest 308 308 308 132 132 132
EBT 19,692 29,692 39,692 19,868 29,868 39,868
Taxes 7,680 11,580 15,480 7,749 11,649 15,549
EAT 12,012 18,112 24,212 12,119 18,219 24,319
# Shares 3,047 3,047 3,047 3,114 3,114 3,114
EPS 3.94 5.94 7.95 3.89 5.85 7.81

The EPS/EBIT Analysis reveals debt financing is best under all economic situations.

M. Epilogue

Citigroup’s Q3 2015 earnings reported on October 15 increased by a whopping 51 percent year-over-year

to $4.3 billion surpassed Wall Street’s expectations but the bank’s revenues declined 5 percent to $18.7
billion due in part to its consumer banking and credit card segments doing poorly. The bank’s operating
expenses were $10.7 billion for the third quarter, mainly due to lower legal expenses compared to last
year’s expenses. Legal and related expenses stood at $376 million, significantly down from the $1.6 billion
reported in the prior year’s quarter.

The company’s Citi Treasury and Trade Solutions (TTS) segment in fall 2015 began paperless processing
for both Account Opening and Maintenance on accounts in the United States and Canada. This capability
also provides a fully digital bank account management service for clients using eBAM via CitiDirect BE,
Citi’s proprietary online banking platform.

Analysts at Citigroup in October 2015, led by Tobias Levkovich, reported that nearly $4.5 trillion has been
put into US equities through corporate buybacks since 2004, compared with less than $160 billion
cumulatively from US-oriented mutual and exchange-traded funds in the same time period. The Citi
analysts went on to say that companies that buy back their stock tend to outperform the broader index, but
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 according to Citi it is not that one time big buybacks lead to higher performance but rather the consistent
buybacks over an extended period of time. Finally, the Citi analysts said they expect the recent era of big
stock buybacks to be drawing to a close, as mergers and acquisitions activity abounds and companies opt to
buy other firms' shares instead of their own. Citi actively assists firms in merger deals.

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