Citigroup aims to shed $400 billion of assets Citigroup Inc said on Friday it plans to shed $400 billion of assets within three years and boost revenue by up to 10 percent annually, in a bid to restore profitability after huge losses tied to flagging mortgage and credit markets. Vikram Pandit, who became chief executive of the largest U.S. bank in December, revealed the plans at a much-anticipated presentation to investors and analysts. He has faced growing demands to slash costs, shed poor-performing businesses, and reinvigorate a stock price down by more than half in the last year.
Citigroup shares were down 60 cents, or 2.5 percent, at $23.70 in afternoon trading on the New York Stock Exchange.
"It's definitely going to be a show-me story," said Thane Bublitz, a senior analyst at Thrivent Financial for Lutherans in Appleton, Wisconsin.
Citigroup lost nearly $15 billion in the last two quarters, and has suffered more than $45 billion of write-downs and credit losses since last summer, as the housing slump deepened, subprime mortgages imploded and credit markets tightened. More jobs will be cut, on top of 13,200 announced this year.
"It's a net positive for Citi just to shrink," said Henry Asher, president of Northstar Group Inc, a New York money manager.
Pandit said he plans to reduce $500 billion of non-core "legacy" assets, an amount he said was not "trivial," to below $100 billion in two to three years, largely through sales.
Among the assets to be shed are real estate, leveraged loans, complex debt and structured investment vehicles. Citigroup ended March with $2.2 trillion of assets.
Some investors believe Citigroup, built over nearly two decades by Sanford "Sandy" Weill into a behemoth now operating in some 106 countries, is too big. Charles Prince, who quit as chief executive in November, long rejected that accusation.
"Pandit is telling investors he is going to try to restructure," said Tom Sowanick, chief investment officer at Clearbrook Financial LLC in Princeton, New Jersey. "He seems to have a different heart than Sandy Weill and Chuck Prince."
Market Update 080512 http://biz.yahoo.com/mu/update.html 4:30 pm : The stock market rallied more than 1% on Monday as investors were encouraged that the market held up to an earnings warning from FedEx (FDX 90.50, +0.13) and a substantial loss at a major bond insurer. However, volume was light so it remains to be seen how concerted this upward move will be.
Stocks got off to a sluggish start after FedEx warned that its profit will fall short of its previous estimate. Also weighing on stocks was news that bond insurer MBIA (MBI 9.85, +0.42) lost a whopping $2.4 billion, or $14.03 per share.
The negative sentiment, however, was short-lived as shares of MBIA rebounded into positive territory shortly after the open as the company reassured investors it has plenty of liquidity. Meanwhile, FedEx managed to bounce to the unchanged mark after being down as much as 3.1%.
The reversal of the two stocks helped lift overall sentiment. In the end, nine of the ten economic sectors posted a gain.
The consumer discretionary sector posted the largest advance of 2.1%. The sector benefited from a 9.6% spike in shares of Clear Channel (CCU 32.87, +2.87) on word it was negotiating a settlement over its lawsuit against several banks that backed out of their commitment to fund Clear Channel's private equity buyout.
A strong showing by retailers also gave the discretionary sector a boost. Wal-Mart (WMT 58.02, +0.84) posted a solid advance ahead of its earnings report on Tuesday. According to Bloomberg.com, Citigroup raised its price target for Wal-Mart to $67 from $57.
The tech sector was active, and modestly outperformed the broader market with a 1.3% gain. Apple (AAPL 188.16, +4.71) saw a boost after its price target was raised at Amtech and BMO Capital. The stock also benefited from reports that the iPhone is sold out at Apple.com, fueling speculation that a new iPhone may soon be released.
IT services company EDS (EDS 24.13, +5.27) spiked on word that Hewlett-Packard (HPQ 46.64, -2.49) is close to a deal to acquire EDS. The Wall Street Journal reported the purchase price will range from $12 billion to $13 billion, roughly a 30% premium.
Research In Motion (RIM 141.97, +9.20) posted a hefty 7% gain. Traders liked what they heard at RIM's analyst meeting, including details of the company's new BlackBerry Bold smartphone.
Financials (+1.7%) provided leadership. Advances in Bank of America (BAC 37.44, +0.79) and JPMorgan Chase (JPM 47.24, +0.67) helped offset weakness in AIG (AIG 38.37, -1.91).
The energy sector underperformed on a relative basis, with a modest 0.2% decline. Crude prices fell 1.6% to $123.91 per barrel, which weighed on the sector. However, the drop in crude prices helped ease some fears, considering crude closed at an all-time high in each of the five previous sessions. DJ30 +130.43 NASDAQ +42.97 NQ100 +1.9% R2K +1.2% SP400 +1.8% SP500 +15.30 NASDAQ Dec/Adv/Vol 862/1974/1.77 bln NYSE Dec/Adv/Vol 886/2237/1.05 bln
3:30 pm : After a brief stall, the stock market is trading at session highs as two major news items hit the wires.
Shares of IT services company EDS (EDS 24.09, +5.23) are spiking on a Wall Street Journal report that Hewlett-Packard (HPQ 46.35, -2.78) is close to a deal to acquire EDS for $12 billion to $13 billion, roughly a 30% premium.
Meanwhile, former AIG (AIG 38.99, -1.29) CEO Maurice Greenberg sent a letter outlining AIG's problems to its board of directors. He also wants a postponement of this week's annual meeting so shareholders can "give careful thought how best to move AIG forward." AIG stock plunged nearly 9% on Friday after the company reported a larger than expected loss.DJ30 +129.55 NASDAQ +41.55 SP500 +14.35 NASDAQ Dec/Adv/Vol 861/1949/1.43 bln NYSE Dec/Adv/Vol 901/2215/794 mln
2:55 pm : The S&P 500 is managing to hold above the 1400 level, which is considered a key area of resistance by technical traders. Crude has traded in a volatile manner this session, as it has quickly fallen to a session low with a loss of 1.7% to $123.84 per barrel.
Each of the three major indices are posting a gain of at least 1%, with the Nasdaq outperforming. Small-caps are also seeing some buying interest, with the Russel 2000 Index up 1.9%.DJ30 +153.72 NASDAQ +43.85 SP500 +15.25 NASDAQ Dec/Adv/Vol 859/1947/1.28 bln NYSE Dec/Adv/Vol 897/2200/701 mln
2:30 pm : The major indices spike to fresh session highs. Nine of the ten sectors are posting a gain, with four sectors up more than 1%. Consumer discretionary is leading the way with a 1.7% gain, lifted by Clear Channel (CCU 32.69, +2.69), which has confirmed it is in settlement talks.
The Volatility Index, which measures the S&P 500's movement over the next 30 days, is down 5.9% this session. The index is down 19% this year, and is down 51% from its 52-week high that was reached in January.DJ30 +126.66 NASDAQ +36.82 SP500 +12.52 NASDAQ Dec/Adv/Vol 912/1891/1.17 bln NYSE Dec/Adv/Vol 955/2122/642 mln
2:00 pm : The stock market is off its best level, but continues to post a decent gain. Telecom (-0.03%) has joined the energy sector (-0.3%) in the red.
JPMorgan Chase (JPM 46.64, +0.07) said it expects $200 million to $250 million in second quarter subprime loan losses, and will have to add to loan loss reserves. The firm believes the capital market crisis is 75% done, and will probably be over by the end of the year.
Just hitting the wires, April Treasury Budget came in at $159.3 billion, which is basically in-line with the $160 billion consensus.DJ30 +89.56 NASDAQ +26.20 SP500 +8.19 NASDAQ Dec/Adv/Vol 1016/1753/1.05 bln NYSE Dec/Adv/Vol 1062/1998/578 mln
1:30 pm : The major indices have pulled back from their session highs, but remain well into positive ground. The Nasdaq continues to trade more than 1% higher, led by a few of tech's heavyweights.
Microsoft (MSFT 29.80, +0.41), Apple (AAPL 187.63, +4.18), and Oracle (ORCL 21.47, +0.47) are all helping the Nasdaq move higher. But Research In Motion (RIMM 141.67, +8.90) is providing the most positive influence to the index.DJ30 +87.93 NASDAQ +26.00 SP500 +7.74 NASDAQ Dec/Adv/Vol 960/1797/968.23 mln NYSE Dec/Adv/Vol 989/2047/531.24 mln
1:00 pm : The major indices climb to fresh session highs, with the Dow up roughly 110 points. The S&P 400, with consists of mid-cap stocks, is up 0.7%, sending it into positive territory for the year.
Energy (-0.3%) is the worst-performing sector, even though the S&P 500's best performing group is oil & gas refining (+5.3%). However, the group only has a market cap of $32 billion, which is a small portion of the energy sector's $1.72 trillion market cap.
The Dollar Index (-0.19%) recently took out fresh session lows. It was up 0.65% in earlier trade, but reversed into negative territory as the euro advanced against the dollar.DJ30 +108.77 NASDAQ +32.59 SP500 +10.68 NASDAQ Dec/Adv/Vol 870/1853/887 mln NYSE Dec/Adv/Vol 918/2103/485 mln
12:30 pm : The major indices continue to post substantial gains, with the Nasdaq Composite outperforming. Market breadth is bullish with advancers outpacing decliners by 11-to-5 on the NYSE and by 17-to-8 on the Nasdaq.
Shares of Clear Channel (CCU 33.26, +3.26) have spiked on a Wall Street Journal report that a settlement is imminent regarding its lawsuit against the financiers that balked on funding Clear Channel's private equity buyout. The Journal said the new deal will be priced at $36 per share.DJ30 +99.00 NASDAQ +29.26 SP500 +9.20 NASDAQ Dec/Adv/Vol 873/1832/799 mln NYSE Dec/Adv/Vol 952/2057/442 mln
12:00 pm : At midday, the stock market is posting a decent gain after traders managed to shrug off an earnings warning from FedEx (FDX 90.90, +0.53) and a massive loss from a major bond insurer. A slide in oil prices is being widely reported as a catalyst for this session's buying interest, but this is not the case considering the market actually climbed to its best levels of the session as crude oil rebounded from its session low. Crude oil was down as much as 1.7%, but is currently down just 0.1%.
After Friday's close, FedEx cut its fiscal fourth quarter earnings guidance, citing fuel costs. FedEx now expects to earn between $1.45 and $1.50 per share, compared to its previous forecast of $1.60 and $1.80.
Meanwhile, bond insurer MBIA (MBI 10.03, +0.60) announced a first quarter loss of $2.4 billion, or $14.03 per share, largely due to a $3.6 billion pretax loss on insured credit derivatives. Excluding items, MBIA lost $3.01 per share. Shares were down 2% shortly after the open, but MBI is currently 6.4% higher as the results were not as bad as feared. New York Insurance Superintendent Dinallo said on CNBC that MBIA's reported loss was within the stress scenarios used by ratings agencies and regulators.
In other earnings news, Sprint Nextel (S 9.38, unch) lost 1 million customers, but reported an adjusted profit that topped analysts' expectations.
A couple of notable brokerage stock price target raises are helping to lift the overall market. Wal-Mart (WMT 57.99, +0.81) is posting a hefty gain after Citigroup raised its price target for Wal-Mart from $57 to $67, according to Bloomberg.com. Apple (AAPL 186.45, +3.00) is giving the tech sector a boost after having its price target raised at BMO Capital and Amtech.
Nine of the ten economic sectors are posting a gain, led by strength in consumer discretionary (+1.3%) and financials (+1.2%). Energy (-0.1%) is the main laggard, but pared its loss of 1.5% as crude oil prices rebounded.DJ30 +90.45 NASDAQ +27.47 SP500 +8.83 NASDAQ Dec/Adv/Vol 844/1836/686 mln NYSE Dec/Adv/Vol 820/2052/380 mln
11:30 am : The stock market has stalled near session highs. The Nasdaq is outperforming thanks to strength in Research In Motion (RIMM 139.54, +6.77) -- which is not a component of the S&P 500 because it is a Canadian company. RIM is up 22% this year, making it the fourth best performing Nasdaq 100 stock year-to-date.DJ30 +72.87 NASDAQ +18.09 SP500 +6.29 NASDAQ Dec/Adv/Vol 984/1668/581 mln NYSE Dec/Adv/Vol 1035/1918/325 mln
11:00 am : The stock market is lifted to its best level of the morning in mostly broad-based strength that is led by financials (+1.0%) and technology (+0.7%). Only the energy sector remains in the red with a 0.7% decline, but has cut its loss in half.
Wal-Mart (WMT 57.99, +0.81) -- the world's largest retailer -- is showing notable strength ahead of its earnings report on Tuesday. According to Bloomberg.com, Citigroup raised its price target for Wal-Mart from $57 to $67.
Meanwhile, FedEx (FDX 90.09, -0.28) has recovered from its opening loss when its stock was down 3.1%. The company warned after the close on Friday that it will earn less than previously forecasted in its fiscal fourth quarter due to higher fuel costs.DJ30 +62.69 NASDAQ +18.79 SP500 +1393.63 NASDAQ Dec/Adv/Vol 889/1700/460 mln NYSE Dec/Adv/Vol 989/1917/255 mln
10:30 am : The S&P 500 briefly slips into the red and then quickly recovers back to the unchanged mark. MBIA (MBI 10.36, +0.93) is up nearly 10%, even though the bond insurer posted a first quarter loss of $2.4 billion, or $13.03 per share.
Apple (AAPL 184.61, +1.16) is outperforming tech (+0.3%) with a 0.6% gain after having its price target raised at AmTech and BMO Capital. However, buying interest is being held in check on news of Research In Motion's (RIMM 138.05, +5.28) new BlackBerry Bold, which will compete with the iPhone. RIM's stock has hit a new lifetime high as traders embrace what they have heard at the company's analyst day.DJ30 +23.45 NASDAQ +7.21 SP500 +0.61 NASDAQ Dec/Adv/Vol 1068/1464/325 mln NYSE Dec/Adv/Vol 1193/1633/189 mln
10:00 am : The S&P 500 is clutching the unchanged mark after slipping off its opening highs. Six of the ten economic sectors are in positive territory. Financials are leading the way with a 0.7% gain, after facing notable selling interest in the prior week. The energy sector is the main laggard with a 1.2% decline, as crude slips 0.5% to $125.28 per barrel.
Chicago Fed President Evans noted consumers are under a lot of stress, and said the current rate policy is appropriate.DJ30 +19.05 NASDAQ +4.17 SP500 +0.33 NASDAQ Dec/Adv/Vol 1020/1420/186 mln NYSE Dec/Adv/Vol 1180/1571/115 mln
09:40 am : The stock market opens on a slightly higher note as traders shrug off an earnings warning at FedEx (FDX) and a massive quarterly loss at MBIA (MBI).
Meanwhile, Sprint Nextel (S) reported a net loss of $0.18 per share. When excluding one-time items, however, Sprint earned $0.04 per share, topping expectations by two cents.
In deal news, Cablevision (CVC) is acquiring 97% of Newsday for $650 million from Tribune Company. The deal follows the withdrawal of News Corp's (NWS.A) $580 million bid.DJ30 +41.52 NASDAQ +6.08 SP500 +3.90
09:14 am : S&P futures vs fair value: +2.3. Nasdaq futures vs fair value: +2.5.
08:59 am : S&P futures vs fair value: +0.8. Nasdaq futures vs fair value: -0.3. Futures point to a sluggish start to the session.
08:27 am : S&P futures vs fair value: +2.8. Nasdaq futures vs fair value: +1.0. A slightly higher start to the trading day is expected. Crude oil has eased 1.5% to $124.13 per barrel, after surging 8% last week.
08:00 am : S&P futures vs fair value: +3.8. Nasdaq futures vs fair value: +4.0. Futures point to a modestly higher open as traders shrug off lowered fourth quarter earnings guidance at FedEx (FDX). In earnings news, Sprint Nextel (S) topped its estimates, while bond insurer MBIA (MBI) posted a massive first quarter loss of $2.4 billion. In deal news, Cablevision (CVC) is close to buying the newspaper Newsday for $650 million after News Corp. (NWS.A) withdrew its bid, according to the Wall Street Journal.
06:19 am : S&P futures vs fair value: +2.1. Nasdaq futures vs fair value: -0.5.
06:18 am : FTSE...6234.00...+29.30...+0.5%. DAX...7047.29...+44.11...+0.6%.
06:18 am : Nikkei...13743.36...+88.02...+0.6%. Hang Seng...Holiday.........
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