Citi Untangles Assets, Gets an Uprgade
The New York-based company's shares rose 14 cents to $4.04 on Monday, up nearly 4%, following an upgrade by noted banking analyst Richard Bove of Rochdale Securities. In his research report raising Citi's stock to buy from neutral, Bove said Citigroup "is the only truly international bank in the United States and, one might argue, in the world."
Bove said the company is in the lead to become the first global credit card issuer. "It is a money making machine and the stock is long-term cheap," he said.
Bove tells DailyFinance that Monday's stock boost can be attributed to the company's sale of another overseas division, "confirming its willingness and ability to shrink its troubled asset base."
Shrinking Troubled Assets
The company announced late Friday that it sold its Citi Card portfolio, made up of $1.25 billion in assets. The move is part of a strategy to reduce assets in its Citi Holdings division and increase growth in its Citigroup division. Terms of the deal weren't disclosed.
Citigroup reported a net loss for 2009 of $1.6 billion, and Citi Holdings reported a loss of $8.2 billion. Since the end of 2007, Citi has shed more than 35 businesses, and ones linked to Citi Holdings will continue to shrink. Overall, Citi Holdings' assets have declined by $351 billion, or almost 40%, over the past two years.
Citigroup declined to comment on Bove's report or the stock boost, but it pointed to CEO Vikram Pandit's letter to shareholders last week outlining the importance of the company's global position, with 50% of its revenues coming from markets outside of North America.
Not a "Financial Supermarket"
Pandit, who has been CEO since December 2007, said Citi was no longer intent on being a "financial supermarket" and will work on keeping its balance sheet in check and focus on the classic functions of a bank: deposits, loans and capital.
Citi did take taxpayer assistance under the Troubled Asset Relief Program but has since paid back the loan. In the last year, the company's assets have been reduced by 21%, and it employs 110,000 fewer people since the peak in 2007.
Citigroup has been one of the most actively traded stocks over the last week, jumping from a low of $3.35 a month ago to its current price over $4. For the year so far, the stock has risen 54%.