Financial Fundamentals Of Citi Group Inc And Its Key Competitors

Financial Fundamentals of Citi Group Inc and Comparison with Key Competitors

Risk analysis can be effective for a corporate body to overcome an unacceptable situation in the future. Risk analysis can also be said as a part of risk management, which makes it easy for a company to analyze the hidden risk. In looking into the performances that are being done by Citigroup Incorporation, it can be said that the cash flow statement from 2013 to 2017 does not show a proper elaboration of performances that are being done. The general cash flow of the company had declined within the years making it hard to properly take control of the performances (Kou, Peng & Wang, 2014).

About banks

Abu Dhabi First bank

The bank mainly helps to support the growth ambitions of the stakeholders across different countries in which the bank are operating. Effective risk assessment processes are also incorporated that helps to enhance organisation policy framework.

Standard Chartered Bank

Standard Chartered Bank offers services that help to enhance wealth and growth across the market. There are all total 86,000 employees that have a particular focus to support customers who are trading or individuals who invest across the footprint.

Citi Bank

The organisation provides wide rand of service to the customer, cooperation and institutions in a broader range. Effective strategies are needed to be incorporated that helps to resolve organisational risks faced in the recent market.

Literature Review

Banking sectors play a fundamental role in economic growth, as it is the elements that the channelizing funds from borrowers and lenders. It has been analysed that banking concentrates on the elements that determine interest margin. As analysed by Abraham & Shrives (2014), interest margin is the principal factors that help to identify risk elements. This also helps to measure the degree of competition in the present market.

Effective economic policies are needed in the organisation that helps to reduce the interest margins. Use of economic policies helps in avoiding increase of interest margins in the banking process and reduces financial intermediation in society as a whole. The effective risk assessment process is necessary as the complicated network in the bank make exposure of the actual risk factors. In Australia, risk assessment standards are used as a network model within the banking process.

Quantitative factors are there that influences the share price for the listed bank in the stock exchange period. Empirical analysis helps to dependent and independent variables. This process includes price efficiency, operational efficiency and allocation efficiency (Almumani, 2014). Effective maintenance of stock price helps to maintain risk in the recent market.

Different Types of Risks Involved in Citigroup Incorporation, Abu Dhabi First Bank, and Standard Chartered Bank

Banking sectors need to use effective Data Envelopment Analysis (DEA) in case of a commercial bank. Efficiency level is examined that helps organisational position. In the recent market, Data Envelopment Analysis is the most popular approach measure efficiency scale in the market Data Envelopment Analysis is a mathematical programming technique that helps in effective decisions making the process to reduce risk (LaPlante  & Paradi, 2015). It is also observed that the CSR process is justifiable. In the operational scale, Data Envelopment Analysis helps to verify productivity scale with the change in time.

Data Envelopment Analysis in developing risk assessment strategies that help to prevent bankruptcy. The negative effects that are analysed by the banking sector in Australia shook the world economy and trade channels particularly (?epková, 2014). In the recent global crisis, it has been observed that since 1980s risk assessment is effective. An effective decision is made with the help of risk assessment strategies. Efficiency level is also increased with the help of effective technical indicators.

Banking proves to develop a structural model in the Australian banking sector. In the present market, it has been analysed that there are several forces that affect the organisation. About Egan, Hortaçsu & Matvos (2017), the effective financial structure needed to be applied that helps to distress demand for uninsured deposits.

Different types of risks involved in Citigroup Incorporation, Abu Dhabi First bank, and Standard Chartered Bank

Though the Citigroup Incorporation is recognized for its proper working aspects, risks are involved in almost every procedure that is taken into consideration. The different types of risks that Citigroup incorporation faces will be elaborated in the following chart:

As per the above figure risks involved in the Citigroup, incorporation had been illustrated which provides a suitable idea about the financial risks and Non-financial risks that are mainly associated with the planning and strategies made. This risk can be seen when the bank provides credit amount to the customers or company and then the company becomes bankrupt (Sahin, Gokdemir & Ozturk, 2016).

Then it becomes hard for the company to give the edit money to the bank and ultimately it is considered as a risk. Market risks come into consideration when the bank has various competitors to deal with. This makes it hard for the bank to properly control the performance and deal with the necessary working aspects. The credit risk consists of counterparty risk, intrinsic risk and portfolio risk Abraham & Shrives (2014). Taking these into consideration, it can be said that each elaborated risks regularly occurs which makes it hard to conduct proper professional acts for the management of the bank.

Risk Analysis Procedures for Citigroup Incorporation

In this context, the different risk analysis procedures that Citigroup Incorporation may take into consideration are as follows:

Research and Development: In this context, maximizing of the share needs to be proactive to make decisions and forecast future business performances in the selected bank. In this prospect, gathering information need be presented for future roles (Ngo & Nguyen, 2016).

Prospecting: A Financial institution needs to form a proper banking prospectus into consideration, which will help the company to properly lead the business to new heights (Dupre, Argyriou, Tzimiropoulos, & Greenhill, 2016). Considering this, it may also be the case under which if Citigroup Incorporation does not do a proper prospectus on time then it may need to go through proper risk management procedures to deal with the situations. Taking this into context the bank may only need to consider a proper prospectus that will be suitable for the company to perform proper working aspects. 

Internal Analysis: The internal analysis of the company includes searching for strengths, weaknesses, opportunities, and threats of the selected organisation. This helps the organisation to measure its shortcomings and take necessary steps for better performance (Gongyu, Rong, Cong & Xin, 2016).

External Analysis: External analysis makes it easy or the company to properly take control over the performances and deal with necessary aspects as per the requirement (Cagliano, Grimaldi & Rafele, 2015). Considering this, it may be suitable for the company to perform and maintain the works appropriately. On the virtue of which external analysis can be maintained and performed and lay a core foundation of performances for the chosen bank in different logical ways (Modarres, Kaminskiy & Krivtsov, 2016). 

Research Methodology

In the research work, the effective calculation is managed to evaluate the level of risk among the banks. Effective financial ratios are also used with the help of accounting standards. Profitability structure is also maintained effective that helps in obtaining growth in the recent market. It has also been used about the method of correlation that helps to measure the risk factors. The leverage ratio is also calculated that helps in obtaining efficiency in the cash flow statement. Asset management ratios are also calculated in the banking organisation to generate profit in the current economy.  The methodology used effective ratio analysis to evaluate liquidity, profitability and solvency rate in an organisation (Heikal, Khaddafi & Ummah, 2014).

The present condition of the banks is evaluated with the help of using financial ratio process. In the ratio analysis process, organisational ratios are evaluated as they are used by the stakeholders to compare the organisational growth in the last few years. Effective use of accounting process helps the organisation to know strength and weakness based on competitors present in the market. In the banking sectors, the profitability ratio is used to ascertain by the organisation to know the profit margin in the current market.

Conclusion

Effective use of Return on equity is measured in the organisation that helps to know the return rate obtained by the individual bank. Liquidity process is concerned regarding the daily requirement of income and expense (Egan et al., 2017). In the banking sector, effective maintenance of liquidity is important that helps to measure relation to meet the short-term obligation. Liquidity calculation helps the organisation to evaluate either the organisation can pay its short-term obligation. The leverage ratio is also maintained in the organisation that helps to know debt present within the organisation (Chugh, 2016). Capital structure is maintained effective with the help of maintaining effective debt structure in banking group to meet organisational financial obligational.

Risk Analysis Framework

As per the performance was done in Citigroup Incorporation the different risk, analysis procedures that the bank needs to consider are as follows:

he above chart elaborates about the different performance day to day that was done by the company in providing a proper elaboration relating to Citigroup International. Taking this into consideration it can be said that Citigroup performance had been a mix which made it easy for the company to perform and deal with the necessary aspects of standard deviation and FAB. On 15/2/2017 the company reached the till date high of 804.31 which was due to the principles include responsibility, honesty, trust, and prudence. The cash flow has also been fluctuating in between the period. However, in 7/12/2017 the company again gain confidence acquired a total amount of 803.72 and since then the company had been performing to the point.

The risk was due to FP has a higher chance to fail financially compared to the other models in regards to accuracy, type I and II error. The financial path prediction model supplements financial failure analysis and prediction research. In October, the company got low almost 200 points and 14/8/2017 the share price of the company we recorded as 672.4 and it continued for the end of the year under which in 11/12/2018 the stock price of the company fell to 585.3which was taken appropriately. The stock market value of Citigroup Inc (US) dropped $244 billion to $20.5 billion in two years.

Return
Citi bank X	Standard chartered Y	FAB Z
-0.048246547	-0.00958876	-0.00959
-0.003573024	0.029537249	0.029537
-0.007619902	-0.030921299	-0.03092
-0.020551039	-0.009539454	-0.00954
-0.007378372	-0.028063805	-0.02806
-1	-1	-1

Table 1: Calculation of Return Citigroup Incorporation

(Source: Self-Developed)

The above table elaborates about the return that was incurred during the year under which the standard chartered is the competitor that the Citigroup Incorporation is competing against. Due to the Subprime, mortgage crisis as the economic crisis was named left the company with a huge loss. The loss arose from poor management of risks and collateral debt obligations.

Citi bank X	FAB Z
-0.048246547	-0.00959
-0.003573024	0.029537
-0.007619902	-0.03092
-0.020551039	-0.00954
-0.007378372	-0.02806
-1	-1

Table 2: Calculation of FABZ representing Citigroup Incorporation

(Source: Self-Developed)

The above table elaborates the calculation of FABZ, which had been calculated as negative and, makes it hard for the bank to perform accurately and properly. Taking this into consideration the market value of the company was affected during the year due the malpractices comprised of the fundamental principles that are the foundation of the finance business.

Standard Deviation ( basic risk of stock )

40%

40%

40%

Covariance XY	0.135160719
Co.variance YZ	0.136591189
Co.variance XZ	0.135160719
Correlation XY	0.997924094
Correlation YZ	1
Correlation XZ	0.997924094
Weight X	0.33
Weight Y	0.33
Weight Z	0.33
X = weightX * SD X	0.132478745
Y=Weight Y * SD Y	0.133602906
Z=Weight Z * SD Z	0.133602906
Portfolio SD	39.95%
average SD should be more than Portfolio SD	40.37%

Table 3: Calculation of Covariance of Citigroup Incorporation

(Source: Self-developed)

The calculation relating to the covariance of the company had been elaborated under which it can be seen that the company had been taking control of the procedures under which the covariance of XY, XZ and XZ had been calculated as 0.135, 0.136 and 0.135. The weight of X, Y and Z had been calculated as 0.33 which is appropriate for the company for the difficulties faced during the years.

Conclusion

Effective risk assessment analysis helps the organisation to have growth in the recent market. The functions of risk management in banking sectors can be said as complex as the banks always try to use the simple version of the management system. This helps to make the process easy to control the financial aspects of the financial institution. Data Envelopment Analysis is used in the banking organisation to enhance organisational goal in the recent market. In the calculation above it has been government acquired $27 billion of preferred shares and it was further warranted to acquire the company’s common stocks in the present market. The government intervened and rescued the company from bankruptcy in return of risk assessment strategies. In the study above covariance are also calculated.

References

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Almumani, M. A. (2014). Determinants of equity share prices of the listed banks in Amman stock exchange: Quantitative approach. International Journal of Business and Social Science, 5(1), 91-104.

Cagliano, A. C., Grimaldi, S., &Rafele, C. (2015). Choosing project risk management techniques. A theoretical framework.Journal of Risk Research, 18(2), 232-248.

Chugh, S. K. (2016). Firm risk and leverage-based business cycles. Review of Economic Dynamics, 20, 111-131.

Dupre, R., Argyriou, V., Tzimiropoulos, G., & Greenhill, D. (2016). Risk analysis for smart homes and domestic robots using robust shape and physics descriptors, and complex boosting techniques.Information Sciences, 372, 359-379.

Egan, M., Hortaçsu, A., &Matvos, G. (2017). Deposit competition and financial fragility: Evidence from us banking sector. American Economic Review, 107(1), 169-216.

Gongyu, H., Rong, L., Cong, J., &Xin, L. (2016). Risk Analysis and Evaluation of Long Slope Mining Construction by TBM Techniques. Chinese Journal of Underground Space and Engineering, 3, 038.

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Kou, G., Peng, Y., & Wang, G. (2014).Evaluation of clustering algorithms for financial risk analysis using MCDM methods.Information Sciences, 275, 1-12.

LaPlante, A. E., & Paradi, J. C. (2015). Evaluation of bank branch growth potential using data envelopment analysis. Omega, 52, 33-41.

Modarres, M., Kaminskiy, M. P., &Krivtsov, V. (2016).Reliability engineering and risk analysis: a practical guide. CRC press.

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Sahin, G., Gokdemir, L., & Ozturk, D. (2016). The global crisis and its effect on Turkish banking sector: A study with data envelopment analysis. Procedia economics and finance, 38(3), 38-48.