Citigroup Stock News – Can Modifications Save The Day?
Investors in Citigroup Inc have had a lot to digest recently. The company has issued a mixed bag of results that would leave anyone shaking their head.
The price of C shares has stayed relatively stable recently, at around $4.50 per share as investors weigh different scenarios for the company’s future.
On the one hand, people putting money into the company figure they’re getting their hands of shares of a company that once ruled the entire global financial market and still has a ton of great assets.
On the other hand, investing in Citigroup could become very dangerous. The company is extremely reliant on its huge portfolio of loans, and bad results could doom the company’s earnings. That’s why investors are concerned about Citigroup’s recent moves concerning loan losses.
In the latest reporting period, C built its loan loss reserves by $802 million. This was far less than the $3.9 billion they added for the prior quarter. Certainly the company isn’t expecting that vast of an improvement in loan repayments?
Evidence would suggest the contrary.
Non-accrual loans hit a remarkable $32.68 billion during the recent period. Non-accrual loans are loans that are not being paid the original, agreed-upon contractual interest rate. How much of this amount represents truly dead loans that will never be repaid remains unknown, but the amount must be huge.
Unemployment has stayed high, which is keeping investors being euphoric about C. If job losses stay high, loan repayments remain low. With the the numbers of loans that are not performing already so massive, can Citi really afford too many more bunk loans?
Citi is hoping that loan modifications will bring many of these debts bank from the brink. But if industry wide stats are to be believed, 75% of people who do a loan modification end up back in the soup within 12 months. Not exactly the type of success rate anyone wants to bet the bank on.
It seems that C shares could continue sideways for quite some time as investors watch and learn more about how the modifications are working for Citi. If they end up improving substantially, lots of folks might suddenly feel the urge to buy shares.