My Journey of investing Citigroup

I bought Citigroup stock (C) at US$4.4999 (pre-split price) on 18 March 2011. Under the predecessor CEO, Vikram Pandit, Citigroup elected to do reverse stock split 1 for 10. On 20 September 2017, I successfully sold it at US$70 through ‘Good till cancelled’ sell order. Consequently, I made an absolute profit of 53.8%.

About Citigroup on (my) a Singaporean's point of view

It is well known American bank with huge international banking system that are being performed in Citibank. In Singapore, if you ever receive USA-based bank clearing cheque and you deposit in Citibank Singapore, you bear no admin charge unlike what you will be charged for at our local banks such as DBS Bank, UOB, etc. Similarly, when you bring Citibank ATM/Debit Card to USA/Japan as long as you activate overseas withdrawal online, you can withdraw cash with no admin charge at Citibank ATMs in Tokyo and most parts of USA.

Rationale of Investing in C stock

On the balance sheet, we can see that it is statistically undervalued compared to its market price. The margin of safety is quite sufficient to absorb any inherent personal errors.

Happenings During the Holding Period

Then-CEO, Vikram Pandit, came up the plan to divide Citigroup into two groups – good bank and bad bank. The strategy is to sell bad bank that was no longer in the core strategy of Citigroup. When Citigroup submitted its plan to The Federal Reserve in hope to increase dividend payout. The Federal Reserve rejected the plan and hell went loose.

Vikram Pandit was ousted inside although the official source suggested that he resigned. Michael Corbat, insider but not part of the team that ousted Pandit, was promoted to CEO. Corbat intended to continue Pandit’s strategy.

In 2014, I found that Citigroup has the tradition to rotate the place of AGM around USA. In 2013, it was held in New York and in 2014, it was held in St. Louis, MO. Naturally, I went to St. Louis, MO for annual general meeting (AGM) of C in 2014. When I was there, the American AGM is very different from SG AGM. I needed shareholder pass for US AGM whereas I only need to show my identification card for SG AGM.

Two ladies, probably employees for C, helped me to get shareholder pass and gave me the chance to have ‘voice’ through voting paper. I was so grateful for their effort.

It is really different from what I would experience at AGM in Singapore. There was breakfast at a room in the hotel. I can see a lot of people wearing very formal suits there. Corbat was there to shake hands and talked heartily with them. I went to the ballroom for the formal AGM. Michael O’Neill, chairman of C and Michael Corbat were there to discuss about C. I found that Corbat is excellent speaker and his speech tone is easy to catch and listen. It appears that his wealth of overseas exposure, while working for C, helped him. I applause them as they had very clear plan to run C. Technology will be the major role for C.

At the same time, Wall Street analyst, Mike Mayo, who specialized in analyzing banks, were there. He grilled them for so many hours. It is totally unheard of if It is done in Singapore. Finally, AGM ended just before lunch hour time. I was given a (paper) box by hotel employee since I was told that all C employees and shareholders can take them. I realised it is lunch box! In Singapore, you get no such treatment like that.

In 2014, Corbat had the same setback as Pandit – The Fed rejected its proposal to increase again. It is second time. In 2015, Corbat was determined to resolve this. C kept so much cash that its capital adequacy ratio was so high that there was no chance that it would fail the stress test being done by The Federal Reserve. Sure enough, the proposal to increase dividend payout and share buyback was approved. It was also approved again in 2016 and 2017 for another incremental of dividend payout.

Meanwhile Citibank closed loss-making branches in USA, sold Citibank Japan to 2^nd largest Japanese bank, etc. In Singapore, Citibank has put more emphasis on credit card. In Feb 2017, it has changed requirement of minimum balance for deposit accounts from $5K to $15K.

Honestly, I wanted to do dollar cost average but I was too late as its share price went beyond the price I would buy at.

Rationale of Selling C

I realised that the closure of bank branches and asset reduction affect the valuation on asset basis. I have no sure way to identify its earning power for sure. Therefore, I reduced the expectation of making 300%+ return to 50%+ return. Frankly, C has taken so long time to restore its luster. Now C is back in the healthiest form you ever seen. It is about time to use cash for other opportunities.