Mike Mayo Says Citigroup (C) Cannot Be Trusted
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According to a report from FOX Business Network's Charles Gasparino, securities analyst Mike Mayo issued a note on Monday saying that Citigroup Inc. (NYSE: C) cannot be trusted to disclose its accurate financial condition to investors.
Mayo has been involved in a bitter battle with the firm’s management, as the analyst sees Citigroup setting the stage for future problems similar to the situation that nearly caused the bank to collapse two years ago.
"We believe that Citigroup’s financial targets can encourage short-term excesses over long-term prudence," Mayo wrote. "Citi has an aggressive financial target of 5 percent asset growth when so much of its past problems stem from excessive asset growth."
Mayo has accused Citigroup of using Deferred Tax Assets to bolster capital levels and profits, saying that the bank has used the DTAs to strengthen balance sheets more than any of the other big firms.
"This position is further supported by news that the SEC has investigated these issues. In short, the company claims no DTA adjustment is warranted based on its projected earnings over the next couple of decades. More importantly, accounting precedents seem to us to warrant that a write-down is necessary. The stakes are raised since the lack of a write-down could lead to investor lawsuits later on."
The note by Mayo will certainly escalate the dissension with Citigroup, as the firm has for the past two years refused to take a meeting with the securities analyst.
"Citi's deferred tax asset -- $50 billion -- is more than twice as large as any other US corporation and the largest as a percentage of tangible equity among large banks (39 percent), but it has not recognized any write-down even though most other companies in a similar position (3 years of cumulative losses) have taken write-downs," Mayo wrote.
Shares of Citigroup are down 6 cents to $3.70 in midday market movement on Monday.
Mayo has been involved in a bitter battle with the firm’s management, as the analyst sees Citigroup setting the stage for future problems similar to the situation that nearly caused the bank to collapse two years ago.
"We believe that Citigroup’s financial targets can encourage short-term excesses over long-term prudence," Mayo wrote. "Citi has an aggressive financial target of 5 percent asset growth when so much of its past problems stem from excessive asset growth."
Mayo has accused Citigroup of using Deferred Tax Assets to bolster capital levels and profits, saying that the bank has used the DTAs to strengthen balance sheets more than any of the other big firms.
"This position is further supported by news that the SEC has investigated these issues. In short, the company claims no DTA adjustment is warranted based on its projected earnings over the next couple of decades. More importantly, accounting precedents seem to us to warrant that a write-down is necessary. The stakes are raised since the lack of a write-down could lead to investor lawsuits later on."
The note by Mayo will certainly escalate the dissension with Citigroup, as the firm has for the past two years refused to take a meeting with the securities analyst.
"Citi's deferred tax asset -- $50 billion -- is more than twice as large as any other US corporation and the largest as a percentage of tangible equity among large banks (39 percent), but it has not recognized any write-down even though most other companies in a similar position (3 years of cumulative losses) have taken write-downs," Mayo wrote.
Shares of Citigroup are down 6 cents to $3.70 in midday market movement on Monday.
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