Sterne Agee Reports Citigroup 4Q11 Ended on Sour Note

According to Sterne Agee, Citigroup Inc. (NYSE: C) earned $0.38 vs. $0.43/share last quarter.

Sterne Agee explained in the report, “While core results were markedly weak, several special items affected reported results, including negative CVA/DVA marks and other hedge losses in Securities and Banking of approximately $0.07/share after tax as well as severance/repositioning charges of approximately $0.09/share. In addition, GAAP net income was modestly impacted by FX adjustments tied to the strengthening dollar as well as a $300mm non-cash DTA charge tied to Japan and a lower corporate income tax rate. On balance, we put operating earnings closer to $0.59/share, or well short of Sterne Agee and consensus expectations of $0.70-$0.72. While investor expectations were certainly low heading into the quarter, revenues and bottom-line profits fell well short of expectations across each primary business line, particularly the exceptionally poor results in capital markets and securities and fund services. Moreover, C reported negative operating leverage across the franchise linked quarter, in part due to higher severance/repositioning, higher legal-related costs, and increased investment spend.”

Sterne Agee maintains its Buy rating and $36.00 PT on Citigroup, Inc, which closed at $28.22 yesterday.