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Citigroup (NYSE:C) reported an EPS of $1.06 for its fourth quarter earnings which was $0.02 higher than analysts expectations. Furthermore revenue also surpassed consensus coming in at $18.6 billion. But top and bottom line beats didn’t stop the Citigroup stock from selling off after the earnings release. Citi stock as of today is down over 7% since earnings were announced on the 15th of January (see chart)

In a previous article here, I discussed why I believed Citigroup stock looked very cheap on a valuation basis. Well now as a result of the post earnings sell-off, the company’s price to book ratio has dropped to 0.6 which is 30% lower than the industry average. There is no denying that Citigroup stock is cheap but sentiment rules on wall street and factors such as volatility in equity markets and the continuing oil slump are definitely weighing on Citigroup stock at present.

Citigroup is massively diversified across many international markets and whereby this usually would be considered a strength, it actually was one of the causes of the steep sell off post earnings. The Chinese stock market is down 14% since the start of the fourth quarter and since Citigroup is heavily exposed to emerging markets, sentiment turned bearish very quickly against the stock. Nevertheless banks are better capitalized now compared to 2007. Let’s go through 3 positive items that came out of its fourth quarter earnings.

Declining Efficiency Ratio

Bears will point to the shrinking of the balance sheet and interest income but profitability at the firm remained elevated due to lower expenses. Non-interest expense came in at $11.39 billion which was well over $4 billion lower than Q4-2014. Legal expenses were also almost $3 billion down from the same quarter in 2014 coming in at $453 million which again aided the bottom line. Although the group’s efficiency ratio was higher compared to the last quarter, it was substantially down from Q4-2014 and I believe the trend will continue.