Wall Street Not Worried About Citi - shares edge up

At a Barclays' investor conference,Citigroup's Chief Financial Officer,John Gerspach,said that Citi's Q3 revenue would probably fall by 15% on the year.Barclays' own analyst,Jason Goldberg,had forecast a 12% drop in Citi revenue,so Mr.Gerspach wasn't saying anything the Street didn't already know.The decline is related to lower market volatility,meaning people are trading less often,being more confident in their positions as US presidential election and Brexit fears have abated.*
Mr.Gerspach also expressed optimism about Citi's investment banking business.As well,he is pleased that regulatory reform is on the table in Washington,although the talks are going more slowly than he would like,with several finance-related government posts being vacant.*
Citigroup shares were up 1.54 on the day as of press time,or 2.33%,to 67.71,with the yield at 1.89%.*
Citigroup,Inc (C)

Citi's Global and US Economic Forecasts - what the risks are

In late February,Citigroup issued its global economic outlook.It cut its global expansion forecast from 2.7% to 2.5%.Global prospects are worsening further,with deterioration across advanced economies alongside previous weakness in the emerging markets,Citi's research note said.Britain's upcoming vote on whether to leave the eurozone is a key extra near term global risk that would hurt both the UK and EU economies;while more policy easing from the European Central Bank and Bank of Japan will provide only limited stimulus.*
On 15 April,Citi released its US forecast.Our US outlook has little potential to be surprised on the upside,but the risks are very evident on the downside,said William Lee,head of North American Economics.Risk is from looming uncertainty as to when the Fed will make rate hikes,as well as many important political events here and abroad scheduled in the next few months.Recently reviewed and incoming data imply GDP will grow by 0.9% in Q1 and 1.7% for the year.
Despite such tepid growth prospects,we project a slow decline in the unemployment rate to 4.6% by end-2016,and 4.5% by end-2017.We continue to believe there will be only one rate increase this year-likely in September-unless developments stir financial markets and/or dampen further growth prospects.In that event,December or a later meeting would be a more likely date for an increase,Mr.Lee noted.*
Citigroup (C)

Analysts Pessimistic About Q1 Earnings - where investors should look now

Wall Street analysts are not hopeful about Q1 earnings season,which began,in accordance with tradition,with Alcoa's report after the closing bell.It is supposed to be the worst earnings season since the financial crisis.They foresee a 10% drop in Q1 profit.Despair is unwarranted,however..By Q3,the Street expects a rebound into earnings growth;and,by Q4,it predicts a return to profit growth.*
Scott Wren,Senior Equity Strategist and Managing Director at Wells Fargo Advisors,recommends leaning into those cyclical sectors that have fared best since the February low:consumer discretionary;industrials;and technology.*
Alcoa reported earnings per share of 0.07 per share versus the estimate of 0.02,a significant beat.This success was tempered,though,by their revenue of 4.95 billion versus an estimate of 5.2 billion,a slight miss.The ambiguity may be ascribed to the steep decline in aluminium prices.*
Also reporting this week will be money center banks JP Morgan Chase,Citigroup and Bank of America/Merrill Lynch.*
Alcoa (AA),iShares Global Consumer Discretionary ETF (RXI)

Citi Likes Emerging Market Stocks

Citigroup predicts a nearly 27% upside to emerging markets stocks in the next year.Our main reasons for optimism:consensus is too bearish/underweight emerging markets,liquidity is ample,economic surprises are improving,earnings are outperforming developed markets,and valuations look cheap,Citi said in a note. The Federal Reserve program has propped up emerging market currencies,equities and bonds as it pumped liquidity into the financial markets. The emerging markets central banks' balance sheets should provide enough liquidity to take up the slack of a Fed withdrawal.In aggregate,the balance sheets of growth emerging markets central banks are still expanding by 6.1% on a year-on-year basis .A strong relationship exists between the growth rate of the asset side of central banks' balance sheets and price to book valuations.Expand the central banks' balance sheets and price to book valuations follow,the note goes on to say. Citi favours Asia over the Middle East and Latin America.It prefers China,South Korea and Taiwan in Asia. iShares China 25 Index Fund(FXI),iShares Emerging Markets Index Fund(EEM)

Asia This Day:Last Chance to Ditch Gillard;Infosys Reboots

Indonesia raised interest rates last week,flying in the face of the long-standing global trend of cutting them.
BNP Paribas is recommending purchasing Chinese oil major CNOOC shares on rising production and a projected return on equity of 17% next year.
The Federal Reserve has to communicate a complex message that seems to be getting lost in translation,said John Woods,chief Asia Pacific strategist at Citi Private Bank.The market has to understand that the tapering of bond purchases the Fed is suggesting is not the same as tightening monetary policy.
Stock market losses in recent days are more a correction than a reversal.Once summer is past,we expect the underlying fundamentals to reassert themselves,with a slightly positive outlook into the end of the year.
The Australian parliament is convening today for a final two week session before the September 14 election.A poll shows the opposition coalition leading the Labour government of Prime Minister Julia Gillard by 57 to 43%,which translates to a 30 seat advantage.It is the last opportunity for Labour to replace her,yet former Labour leader Kevin Rudd is unpopular within the party and said he isn't interested in returning to the post.
Infosys co-founder Narayana Murthy has been recalled to the executive chairmanship of the software services firm,having left the CEO post 11 years ago.He said recovery at the company will take 36 months,but they will do whatever it takes to stabilise earnings.Sales have reached a four-year low recently.
It will be painful in the short term,but Infosys will revitalise the sales force with incentives and offer flexible pricing on large contracts.
The MSCI Asia Pacific index was up 0.85% as of mid-day Monday.
Infosys Ltd(INFY),CNOOC Ltd(CEO)

Asia This Day:Japan's New Prime Minister;Has China Turned The Corner

Shinzo Abe(pronounced ah-bay) has been elected the new Prime Minister of Japan.His LDP Party has a 61% majority in Parliament;with a partner,the LDP will have a 68% majority.Mr.Abe had served as Prime Minister three years ago.
The question now is how they use that majority,said Mohammed Apabhai of Citi Global Markets Asia.The priority at the moment is actually controlling deflation and getting growth back on track.Reflation trades include insurers,banks and real estate.
Abe will restore nuclear power to provide affordable energy to the Japanese economy.Only two of Japan's nuclear reactors are currently on line,down to public outrage after last year's tsunami and nuclear accident.Japan's debt to GDP ratio is 237%,the highest in the world.
It's undeniable that China has really turned the corner.There's a lot of scepticism about that from clients internationally.The upside in the rest of Asia is actually a lot higher.
The Chinese Politburo will keep policy stable with adjustments as needed,accepting slower growth.It will fully deepen reforms and firmly promote opening up,the Xinhua news agency reported.
China has submitted documentation on its territorial dispute with Japan in the South China Sea to the United Nations.
Indian investors are awaiting the Royal Bank of India interest rate decision.The Nifty Fifty futures index was down 0.08%.
Australia is in talks with Sri Lanka to curb people smuggling.
The Nikkei index was up a strong 1.54% on Abe's election,while the MSCI Asia Pacific index was up by only 0.04% in early Monday trading.
Citigroup(C)

Should You Buy Citigroup Shares

Citigroup has a competitive advantage,in the view of David Konrad,CFA,Managing Director at Keefe,Bruyette and Woods.They will be able to sell Citi Holdings,their troubled assets,and are doing well at this time of growing trade finance.Citi is improving its Basel III captial ratio.
The drag of Citi Holdings will decline each year,easing significantly over the next few years.The bad bank will take five years to entirely dissolve.In about two years,Citi Holdings will be less than 10% of Citigroup.
The stock will rally 33%.We do a lot of stress models,and we think the capital is there.The transparency has gotten better over the past year.KBW has upgraded Citigroup to outperform,with a price target of 44 dollars.
Keefe,Bruyette and Woods is a full service boutique investment bank.Its specialty is the financial services sector.
Citigroup closed at 34.78 on Monday.
Citigroup(C),Keefe Bruyette and Woods(KBW)

Investing Today:Meandering Through Malaise

We're in a malaise right now,said Tobias Levkovich,Chief  U.S. Equity Strategist at Citigroup.I think that turns in the next 12-18 months.The children of the baby boomers start to save for retirement next year.It's bigger.People are using the U.S. equity market as a safe haven.
The mood on Wall Street is pretty miserable.There's worry about layoffs and compensation.Is this the place for their future?
You've got to do more and more stocks.I think good times will be here 5-10 years out.Telecom has good dividend yields and supplies much-needed mobile services.It will get its pricing power back,Mr.Levkovich predicted.
Christian Thwaites of Sentinel Investments,who was a Baker Scholar at Harvard Business School,likes Toronto Dominion Bank.It's fantastically strong,with a strong deposit franchise in the Northeast and nothing to do with Europe,Mr.Thwaites observed.
Toronto Dominion Bank(TD),iShares Dow Jones U.S. Telecommunications Sector Index Fund(IYZ),iShares S&P Global Telecommunications Sector Index Fund(IXP)

Who Sings On The Citibank ThankYou Card Commercial

The Citibank ThankYou Card commercial joins soaring video with a breezy song.The song is called "Into the Wild."It is by the American singer songwriter known as LP(Laura Pergolizzi).
The video features professional climbers Katie Brown and Alex Honnold,not actors.They are shown climbing one of the Fisher Towers in the Utah desert,about 27 miles from Moab.The pinnacle Brown summits is not considered the most difficult climb at the Towers.Several other ascents there are regarded as being among the most challenging desert climbs.
LP has been prominent since 2006,although for some years she was better known for her songs written for or covered by other performers.Among those credits are recordings of her work by Backstreet Boys;Heidi Montag;Christina Aguilera;and Rihanna.
A New York native,LP now resides in Los Angeles.She's been touring very extensively over the years.You can sample her music on YouTube-including the Citibank track.
The commercial is quite an effective promotion for the credit card,perking groggy viewers up with an outdoor adventure.
Citigroup(C)

Asia This Day:Japan Quake Business Effects-plus an update

Japan is bracing for rolling power blackouts today.Several nuclear plants are offline-one of them permanently,crimping the country's electricity supply.Japan needs 40 million kilowatts,but has been reduced to 10 million.In consequence,there will be 3-hour blackouts for each district.The central business district in Tokyo,where government offices are located,will not be affected.
There is also a shortage of fresh food,water,candles,batteries and rice.Relief supplies are beginning to make their way northward,but many areas have yet to see any.
Cooling efforts continue at four nuclear reactors.U.S. officials said that contamination is not expected to reach America's shores,even though 180,000 Japanese have been evacuated from the reactor zones.Singapore is testing all food imports from Japan for radiation.The imports are predicted to become more expensive as their supply dwindles.
The Japanese stock market reopened Monday,with the Nikkei 225 index down 4.46 at lunchtime.The more broadly based Topix index fell 5.85,while the yen rose 0.45 against the U.S. dollar.Construction stocks were up as high as 62%.
Citigroup said Japanese industrial production would fall 1-2% because of the quake,but will ultimately benefit as reconstruction gets fully underway.Societe Generale feels that the quake will lower bond yields,but the Japanese economy will recover.
The Bank of Japan moved its scheduled meeting up an hour.It is injecting trillions of yen into the system to ensure liquidity.
Update:Nils Diaz,former chairman of the Nuclear Regulatory Commission,says the Japan nuclear accident is relatively low level.He ranked it as a 2 or 3 out of seven.The Japanese workers have it well in hand,carefully releasing small amounts of radiation.It isn't an uncontrolled event such as Ukraine's Chernobyl accident was in the 1980s.As well,the Japanese reactors are more advanced in design and are recovering from a natural disaster,not human error as occurred at Chernobyl or Three Mile Island in Pennsylvania.
Toyota and Nissan have shut production down for the moment.Toyota's stoppage will mean a cut of 40,000 vehicles.On the other hand,Toshiba is restarting a chip factory,though Sony has shuttered facilities.
iShares Japan Index Fund(EWJ)

Citigroup Gauges 2011 Market Risks

Some observers are totally bullish on the new year,but Tobias Levkovich,Chief U.S. Equity Strategist at Citigroup,recalls that we still have geopolitical risk to consider.In addition,we haven't really talked a lot about gasoline prices,which have been climbing markedly lately.
Political heat will occur in the latter part of 2011,as primary election issues come into focus.At that juncture,a separation of the parties will take place.People want something done in Washington,but at some point the paths totally diverge.
Health care will be going on for a couple of years in the courts.The funding of it will be an interesting battle to see,but commodity prices will be much more interesting to the markets.
Profit margins are not being paid attention to.Around mid-year,that could be an issue.Wage creep that pressures the margins could be a big issue.We're looking at the S&P 500 reaching a level of 1400 in 2011.We think the beginning of the year will be relatively strong;then there will be a pullback on some of these margin issues.
We review our targets in December.What drove the markets in December were the tax cut extension and payroll tax deduction,Mr.Levkovich said.A Canadian citizen who frequently appears on business television,he writes a report card on his own performance every year.
Citigroup(C)

Citi Restores The Equilibrium

Things are getting better slowly,in the view of Citigroup Chairman Dick Parsons.Some people would call it anemic,but it's growth nonetheless.
It's not surprising to Mr.Parsons.What we're seeing is what you could have expected.People have to delever,and that's gonna impress some slowness on the economy.
Loan demand is down.Businesses as well as consumers are tightening their belts,while underwriting standards have gone up.Citi loaned as much in Q1-Q3 to small business as they did in all of last year,but the underwriting standards mean some people who used to get loans can't get them now.
It's axiomatic that economies crash from the bottom up,and heal from the top down.The market is coming back down to those who can't get credit,however.There's a restoraion of equilibrium going on.
Businesses are asking how do I adjust my own sales to catch the wind rather than be buffeted by the wind?We need a comprehensive economic plan,Mr.Parsons believes.
While Dick Parsons is Chairman,Vikram Pandit is CEO of Citigroup.The U.S. government has now fully exited its bailout of Citi,making 12 billion dollars in profit for the taxpayers.
Citigroup(C)

Citigroup Has Many Openings

Citigroup has a number of openings for Investment Consultant.They assess,assist,and advise clients as they choose the services best suited for their needs,serving as an advocate,developing relationships with existing clients and building them with new clients.Openings are concentrated in California,with others being in Hong Kong and Singapore,as well as Florida,Connecticut and New York.See careers.citigroup.com for more information on jobs at this leading institution.

Deutsche Bank Recommendations

We hit the trough in Q3 of 2009,says Binky Chada,Chief U.S. Equity Strategist at Deutsche Bank.A large mountain of cash has already built up on corporate balance sheets.For Deutsche Bank,the bottom line is:1.buybacks;2.capital expenditure;and 3.dividends.Almost all of the decline in S&P dividends is from the financials.Over the next few years,DB expects to see the financials pay out.They have the cash.It's very important for regulators to get their arms around the issue.
DB recommends a basket of 50 stocks that cuts across the sectors.They have buys on Rowan,Dupont,Genworth,Molson and Schwab.The arguments for the historical patterns are,if anything,strengthened,in Binky Chada's view.
As for the financials paying out,consider that,once the U.S. Treasury sells its shares of Citigroup,the firm will be free to reinstitute its dividend.The shares are to be sold quietly,over a number of months,so as not to disrupt the market.Citigroup has already repaid its government loan.

A TCW Assessment

Scepticism about the permanence of recent market gains abounds.Strategist Komal Sri Kumar of TCW doesn't believe the fundamentals are there.Banks are not lending,and unemployment is high.There is still quite a bit of downside coming.This is not a market for the common person to buy and hold,in Mr.Kumar's view.
The fact that the earnings are coming from financials is negative for the overall economy.They are from proprietary trading,not commercial lending.The flow of funds data show that loans are being written off;borrowers are not paying them,Mr.Kumar observed.
Indeed,a lot of the market's upswing is attributable to the performance of only one financial stock-namely,Citigroup.Citi will report its earnings next month,a moment of vulnerablity for equities based on what we have seen so far.

Citigroup's Continued Appeal

Citigroup continues to be seen as an attractive holding by many investors.By one measure,65% had a positive reaction to the firm.CEO Vikram Pandit says they've scaled back on proprietary trading,or trading that banks do for their own profit,and support the idea of a regulator who will impose capital requirements.We need global coordination on regulation and derivatives transparency.U.S. consumer credit remains an issue,in Mr.Pandit's opinion.
Citigroup is now focused on being a bank,not a financial supermarket,Mr.Pandit said.We're only as big as what is required to serve our clients in a competitive market.Citi still owes the U.S. government 25 billion dollars.The bank,which gets most of its deposits overseas,will only issue 15 billion dollars of debt this year,versus 85 billion in 2009,Vikram Pandit noted.The company has been shedding non-core holdings in an attempt to emerge from near-catastrophic damage brought on by amassing toxic assets.Since the market low of last March 8,Citigroup shares have risen from 1.05 to 3.56,as of the opening bell this morning.

Saudi Prince Very Close

Prince Alwaleed bin Sultan,a leading investor in U.S. companies,has been expressing his thoughts about the state of the country he clearly feels deeply involved with.The prince,who will be 55 in March,said he's not sure the U.S. is on the right track.It is down,but not out.Mr.Obama needs more time.He has a tremendous amount on his plate:the deficit,the health care situation,as well as the financial crisis.There are so many issues under the table:Social Security,Medicare-they are time bombs.I'd like to get health care behind us and focus on job growth and the Middle East,Prince Alwaleed remarked.
President Obama has to prove he is as tough as former president George W. Bush was,the prince feels.The U.S. cannot be at all lenient on terrorists.Thank God their latest attempt was prevented.On the other hand,profiling is wrong.Remember Oklahoma City bomber Timothy McVeigh?Are all Oklahomans terrorists?the prince asked rhetorically.
Prince Alwaleed,a slight man with a full head of salt-and-pepper hair,owns 5.7% of NewsCorp,parent of Fox News and The Wall Street Journal.He considers it an alliance.It's a core,strategic investment that will never be sold,he insisted.It's a well-run empire by Rupert Murdoch and son James.Prince Alwaleed also owns stakes in Time Warner Communications and Citigroup.The owner of a stable of fine horses,the prince is more than an investor in the U.S.;his evident passion and knowledge confirms that he is also a close friend of America.

Geithner Exercises His Authority

Treasury Secretary Timothy Geithner invoked his statutory authority last week in a letter to the U.S. Congress.Mr.Geithner notified Capitol Hill that he has extended the Troubled Asset Relief Program,or TARP,until October 3,2010.He does not expect to deploy more than 550 of the 700 billion dollar war chest,and is looking for up to 175 billion in repayments by the end of 2010.Reduced commitments will allow significant resources to pay down the national debt.
Mr.Geithner said the extension will allow continued implementation of housing and small business support programs.He anticipates recovering all but 42 billion of the 364 billion in TARP funds deployed this year.Several banks,such as Bank of America and Goldman Sachs,have already repaid their TARP allotments.Citigroup is planning the repayment of its 20 billion dollar loan from TARP.At 9%,Citi's Tier One capital ratio is the highest in the industry,indicating its ability to repay the debt,in the company's opinion.Citi will sell 17 billion in common shares,plus 3.5 billion in tangible equity units.By 2010,Citi will emerge from the pay restriction regime.

Citimortgage Faces the Headwinds

It looks like home prices are gonna be under pressure for the next couple of quarters,says Sanjiv Das of Citimortgage,but he's cautiously optimistic with all the government programs aiding homeowners.We've really been out there trying to help,but face headwinds such as unemployment and homeowners owing more than their homes are worth,Mr.Das explained.We are massively increasing the number of modifications;we are reducing rates and extending the terms.
For Q3,we did substantially better than the industry,Mr.Das held.I can't fight the headwind of unemployment,he admitted.The thing here is to keep aggressively modifying as many loans as we can to keep people in their homes.In Q3,we processed 175,000 mortgages.The modifications are tailored to individual circumstances,Rajiv Das pointed out.The U.S. government is scrutinizing whether the banks are helping enough homeowners with its aid.

Citigroup Tagged By Credit

Credit losses weighed down Citigroup's Q3 earnings.The company lost 0.27 cents a share.CEO Vikram Pandit said that,while consumer credit trends are improving internationally,the U.S. environment is still challenging.Citigroup experienced eight billion dollars in net credit losses.There was some improvement in late stage delinquencies,but there was still some stress in early stage delinquencies.Citi wrote down losses in leveraged loans,and it is likely that toxic asset losses will never be recovered.
The U.S. government owns a one-third stake in Citi,and Citi must pay the government and other investors dividends on preferred stock holdings.Prince Alwaleed bin Talal of Saudi Arabia,one of Citi's major shareholders,has urged the government to divest its position as soon as possible.This is unlikely to happen for some time,however,out of an abundance of caution.
Despite Citi's problems,Deutsche Bank has initiated coverage of the stock with a buy rating,and a target price of 5.50 a share.Citi did realize a Q3 profit of 101 million-much better than last year's Q3 loss of 2.8 billion dollars.An independent evaluation approved of Citigroup's management.