Can Citigroup Inc (C) Earnings Defy the Mortgage Slowdown?

One new problem that Citigroup Inc (NYSE:C) faces is dealing with the new leverage-ratio standards under Basel III and the combined regulatory authority of the Fed and the FDIC. Earlier this week, U.S. regulators proposed a rule raising minimum leverage buffer ratios above their current 3% level, requiring banks that fail to exceed 5% to face limits on bonus payments and capital distributions, and setting the standard for well-capitalized, systemically significant banks at an even higher 6%. With Citi coming in at about 4.5% currently, it will take further action for the bank to reach those higher levels, although the proposed effective date of the regulations would give Citi until 2018 to get there.

In Citigroup’s earnings report, watch for how CEO Michael Corbat continues to make his mark on the bank. As successor to ousted CEO Vikram Pandit, Corbat’s background is in the Europe/Middle East/Africa region, suggesting that he might well continue to emphasize international growth over domestic considerations. Given the regulatory environment that’s taking shape in the U.S., that might be the smartest direction for Citigroup’s future strategic plans to take and the one most likely to produce gains in Citigroup earnings in the long run.

The article Can Citigroup Earnings Defy the Mortgage Slowdown? originally appeared on Fool.com and is written by Dan Caplinger.

Fool contributor Dan Caplinger owns warrants on Wells Fargo, Bank of America, and JPMorgan Chase. You can follow him on Twitter @DanCaplinger. The Motley Fool recommends Bank of America and Wells Fargo. The Motley Fool owns shares of Bank of America, Citigroup, JPMorgan Chase, and Wells Fargo.

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