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What Citigroup Needs to Stay Profitable

Citigroup earnings on Monday provided more evidence that the large financials may be turning a corner. Anton Schutz, president of Mendon Capital, shared his insights on the results.

“Shareholders have to be pleased,” Schutz told CNBC. “And we as taxpayers that own Citi shares have to be pleased and look forward to making some profit on this investment.”

However, Citi Chief Executive Vikram Pandit warned in a prepared statement that the company’s road to recovery could remain shaky.

“I think Vikram has nothing to lose by being conservative,” explained Schutz.

“There’s no doubt that regulatory legislative headwinds are so strong it’s hard for them to predict.”

“We also need to make sure that this economy gets off the ground and Citi’s got lots of reserves and lots of capital now but profitability’s going to be contingent upon continued growth,” he continued.

Currently, Citi’s capital ratio is at more than 11 percent. Until financial regulation passes, Schutz said having high capital ratios would be part of large banks’ “investment thesis.”

“If you have too much, you can return it to shareholders again through stock buybacks and dividends,” he said. “I think that’s going to be a theme in the second half of the year, that’s going to be very powerful.”

  • Watch Schutz's Previous Appearance on CNBC (Mar. 17, 2010)

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More Financial Giants:

JPMorgan

Morgan Stanley

Goldman Sachs

Bank of America

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Disclosures:

Schutz doesn’t have any position in Goldman Sachs. Schutz owns shares of C, JPM and BAC in his funds.

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