To fulfil requirements of

To fulfil requirements of the report, Citigroup Bank

Bank Performance Ratios and Comparison To fulfil requirements of the report, Citigroup Bank Holding Company was chosen as the focal entity. The chosen peer is JPMorgan Chase & Co Bank Holding Company. The choice of JPMorgan Chase as the peer of Citigroup was driven by the fact that JPMorgan is the industry leader in terms of assets. According to MTS Insights, JPMorgan leads in terms of size, financial health, and growth. As Citigroup aspires to industry leadership, it is appropriate to compare it to the current industry leader to enable identification of areas for improvement. Moreover, both banks compete in the same markets, such as investment banking, commercial banking, investment banking, wealth management, securities brokerage, among other financial services. Both also operate globally. Three-year performance and financial condition data for Citigroup, JPMorgan Chase, and Standard Peer Group comprising commercial banks with assets over $250 billion were obtained from the Federal Deposit Insurance Corporation (FDIC) website. The most recent data available was for June 30, 2018. After importing the relevant data to Microsoft Excel, select ratios were plotted in line charts to allow comparisons and identification of trends. The graphs appear in the Appendix. It is evident from the graphs that Citigroups performance and financial condition are worse than those of its peers in many respects. For example, Citigroups capital adequacy and liquidity were worse than those of JPMorgan Chase as illustrated by the graph of Tier 1 risk-based capital ratio, the coverage ratio, and net noncore funding dependence respectively. Figure 1 shows that Citigroups tier 1 capital fluctuated around 12.5 percent between 2016 and 2018 while those of its peers rose steadily. However, the tier 1capital ratios for Citigroup are still higher than the minimum recommended under Basel III (Elbadry 122), meaning the bank is capitalized sufficiently. In terms of liquidity, Citigroup is worse than its peers due to high dependence on noncore funding, which may not be accessible in times of financial stress in either the economy or at the entity level. Unlike its peers, Citigroup has provided more than adequate allowance for loan losses (Figure 8) and has relatively lower proportion of noncurrent loans prone to default and interest rate risk. Citigroup also performs better than its peers in terms of net interest margin with its return on assets matching those of its peers (Figure 3 and Figure 2). The superior net interest margin for Citigroup indicates that it is able to gain more from its interest-bearing investments than it incurs on its interest-bearing liabilities. Not only does a high and growing net interest margin indicate success in investment and financial management but also serves as a signal for financial vulnerabilities or risks (Saksonova 139). K/A RATIO FOR CITIGROUP IN 2019 Citigroup dividend payout ratio as at June 30, 2018 was indicated as zero, implying 100 percent retention rate. Using the figures for average assets and capital, as well as ROA for June 30, 2018 period, the following computations were performed to determine the capital/asset ratio for the same time one-year hence. Current K / A = 144994914 / 1396775355 = 0.103807 (K/A) = * ROA (K/A)(A/A) =1 * 1.23% ((144994914 / 1396775355)* (1396775355 / 1373713934 1)) = 0.010557 Therefore, K / A ratio in one year will be current K / A ratio 0.10381 + (K/A) from above: 0.01056 = 0.11436. Works Cited Elbadry, Ahmed. Banks financial stability and risk management. Journal of Islamic Accounting and Business Research, vol. 9, no. 2, 2018, pp.119-137. MTS Insights. JPMorgan Leading the Financial Industry. Seeking Alpha, 6 June 2018. https://seekingalpha.com/article/4185729-jpmorgan-leading-financial-industry. Accessed 13 October 2018. Saksonova, Svetlana. The Role of Net Interest Margin in Improving Banks Asset Structure and Assessing the Stability and Efficiency of their Operations. Procedia Social and Behavioral Sciences, vol. 150, 2014, pp. 132-141. Appendix Tier 1 risk-based capital ratio Figure 1 Return on assets (ROA) Figure 2 Net interest margin Figure 3 Efficiency ratio Figure 4 Net loans and leases to core deposits Figure 5 Net noncore funding dependence Figure 6 Noncurrent loans to loans Figure 7 Loss allowance to noncurrent loans and leases Figure 8

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