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Wednesday, August 02, 2006

Citigroup, No Joy In Mudville

Stocks: (C)(BAC)(HBC)(JPM)(WB)

Late word comes that HSBC has now passed Citi as the largest bank in the world based on total assets. And Bank of America is coming close to passing Citi as the US bank with the largest market cap.

So much for Barron's upbeat story on the bank titan.

Citi's mix of consumer banking, asset management, and corporate and investment banking is just wrong enough to hold the company's growth down. Unlike Wachovia, it does not excel the consumer field enough to have an engine for growth in that arena. And, unlike JPMorgan, its corporate banking is not a large enough part of the firm to lift the tide of earnings in that area.

Citi's Saudi shareholder may come to call soon. There has been a chorus of shareholders begging for the bank to break itself into two separate pieces, one in the consumer area and one in corporate and investment banking. Those cries will only grow louder as the evidence of a failed strategy to get earning back on track becomes more evident.

"On somewhere in this favored land, the sun is shining bright; the band is playing somewhere, and somewhere hearts are light; And somewhere men are laughing, and little children shout;
But, there is not joy in Mudville--great Casey has struck out".

With a PE of 9.84 and Bank of America's at 12.54, Wall St thinks Citi's off its game.

Douglas A. McIntyre can be reached at He does not own securities in companies that he writes about.

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