Citibank Case Study

Citibank

Citigroup is a global service company with the largest financial network. It suffered huge losses during the 2007-2008 global financial crisis and was later rescued by the U.S government. It is rated one of the biggest banks in U.S alongside Bank of America, Wells Fargo and JP Morgan Chase (Rezaee 2011). Bank of America

Bank of America Corporation is a financial service company serving many countries across the world. In 2010, it was listed as the fifth largest company in the U.S and second non oil company. It was listed by Forbes as the best large company in the world. It performed well even during the time of global economic crisis (Rezaee 2011).

The banks financial performance will be analyse through the decomposition framework

It is calculated as: Total assets divide by total equity. As equity multiplier calculates leverage, the higher EM indicates that a bigger portion of asset financing is being used through debt. The smaller amount of equity multiplier is better, because it spends less money to fund an asset. As we can see on the tables, the EM of Citi Group was 12.161 times in 2009 and 11.706 times in 2015 respectively, it had decreased by 0.455 times due to bigger increase in total equity which was $154.17 billion dollars in 2009 and $157.33 billion dollars in 2010.

In general, both Citi bank Group and Bank of America used less equity capital to funds their assets after financial crisis.

The ROA composes two elements, one is profit margin and the other one is assets

Utilization.

Profit margin (PM)

Profit margin is the measure of the ability to pay expenses and make net income from interest and non-interest income,. PM is calculated as: Net Income/Total Operating Income. The profit margin of Citi Bank Group was -18.60% in 2009 and -0.48% in 2010, which increased by 18.12% due to the much less losses in the net income. Whereas the total operating income decreased from $29.97 billion dollars in 2009 to $22.07 billion dollars in