Second (Citi) Thoughts

There are no bad investments. Only bad prices.

Citibank is facing some serious challenges. The company’s market value reflects this. Does that make Citibank a bad investment? Probably not.

The price has declined almost 70% over the last year precisely because the company is looking at so many issues. But many people now feel that the parts are now individually worth more than the whole.

Take their consumer business. Years ago they bought Diner’s club, Associates, and Macy’s credit cards and wove them into their integrated consumer lending operation. In the process, these disparate businesses were made more efficient and their risk management was taken up a notch. Now the US consumer is on the rocks, but these businesses are more valuable than they would otherwise be.

With the turmoil in the capital markets, Citi’s shares have been marked down to the point where their book value is higher than their market value. Given Citi’s diversified business mix and their potential for global growth, the stock just might be the real deal.


Douglas R. Tengdin, CFA
Chief Investment Officer
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