Citigroup, Inc. (NYSE: C) has just started the earnings season for the banks “for the rest of America” today.  Vikram Pandit just turned in earnings at $1.09 EPS (up from $0.90 a year ago) on revenues of $20.6 billion.  Yesterday we argued that the bank’s earnings bar was being set higher after J.P. Morgan Chase & Co. (NYSE: JPM) earnings and it is delivering based on the data.  Thomson Reuters had estimates at $0
.97 EPS on $19.94 billion in revenues.

Another key figure that is going to come into play is the net tangible book value, which is $48.75 as of June 30.  That is a gain of $1.88 from the prior sequential quarter.  Citi’s stated book value last quarter was $58.50 and it listed a tangible book value of $46.90.

Net credit losses fell 35% to $5.1 billion, the Tier-1 common was listed as $115 billion and its Tier-1 common ratio is 11.6%.  The bank continues to shrink itself as it turned in 34% lower assets from the prior year and this was listed as $308 billion in assets at Citi Holdings.

Our primary argument for banks right now is that book value matters.  J.P. Morgan Chase & Co. (NYSE: JPM) listed its book value just yesterday as being $44.77 per share, up from $43.34 one quarter ago and up from $40.99 a year earlier.  Jamie Dimon’s bank closed at $40.35 yesterday, nearly a 10% discount to book value.

Citi is up 3.7% at $40.48 in the pre-market trading after closing at $39.02 yesterday. Its 52-week range is $36.30 to $51.50 if you adjust for its recent reverse stock split.  This gives closer to a 20% discount to book value.  J.P.Morgan Chase spent somewhere around $3 billion in buybacks.  Citi noted that it expects to begin returning capital to shareholders next year and end that year with an 8% to 9% Tier 1 Common Capital Ratio under Basel III.

Bank of America Corporation (NYSE: BAC) is now going to have to do even better next week, although we already know that a huge loss is expected due to the multi-billion mortgage settlement.

JON C. OGG