Citi's Presentation: No Mention of Profitability

Vikram Pandit's 26-page presentation this morning "contains forward-looking statements", according to the disclaimer on the final page. But there aren't actually very many of them: in fact, I can only find two. Citi's expense target in 2009 is $50-52 billion, compared to total expenses of $61.9 billion over the past four quarters. And its "near-term headcount target" is 300,000, compared to a total headcount of 352,000 today.

I like the fact that Citi's targeting total headcount rather than job losses, because it's had a habit in the past of making up with new hires whatever it loses in layoffs. But what I was looking for in this presentation, and didn't find, was any indication that Citi might actually make money at any point in the foreseeable future. But it was not to be: the words "profit" or "earnings" are nowhere to be seen.

Pandit lets us draw those conclusions ourselves. Revenues, he says on page 16, are going to stay pretty stable -- although the way his graphic designer decided to demonstrate that looks as though he's trying to divide by zero, which is a bit unfortunate. Meanwhile, expenses are going to fall, and in any case substantially all of Citi's recent losses, turning to page 22, have been thanks to credit and mark-to-market write-downs. If those finally come to an end, Citi will surely start making money again, right?

Pandit also didn't address my biggest concern, which is the fate of Citi's $550 billion in foreign deposits. To the contrary, those deposits are presented as a central pillar of Citi's "structural liquidity". In the presentation, Citi's deposit base looks just as strong as that of JP Morgan or Bank of America -- but no mention is made of the fact that the overwhelming majority of Citi's deposits are uninsured. A single datapoint of what's been happening to those foreign deposits of late would have been somewhat reassuring, but there's no sign of that.

Citi's trading down a little in early trade this morning: the presentation clearly hasn't done anything to reassure the stock market. But that's no reason to panic: I feel I should mention that I have my entire life savings at Citigroup, between Citibank and Smith Barney; they're perfectly safe there, and I'm not moving them anywhere. Citi is clearly in trouble, and those troubles are equally clearly related to its liquidity position rather than its solvency position. But for the overwhelming majority of Citi's US depositors, there's nothing at all to worry about -- indeed, if its US branches get transferred to some other institution, customer service might actually improve.

(HT: Wiesenthal)