Why Citi Beat Up on Everyone and Everything This Week

It was a good week for Citigroup (NYSE: C  ) . With just a little over an hour left in the trading week, the superbank's share price has made a net gain of 3.12%, moving from an opening price of $42.69 to the current price of $44.03.

3.12% was enough to boost the bank comfortably past the performance of its peers and well past the performance of the market. It's tough to chalk this hearty move up to any one thing, but a savvy divestiture earlier in the week may have had something to do with it. Alas, investors may have also missed out an item that could have swung things the other way for Citi.

The tale of the tickers
Here's where some of banking's biggest guns are shaking out at the end of this week's trading:

  • Bank of America (NYSE: BAC  ) is only slightly behind Citi, showing a net gain of 2.56% on the week.
  • JPMorgan Chase is trailing significantly farther behind, with only 0.95% to show for the week.
  • But 1.45% is a lot better than what Wells Fargo, up only 0.23%, could manage.

The market wasn't exactly setting the world on fire this week either, with the Dow Jones Industrial Average currently down by 0.19%, the Nasdaq down by 0.03%, and the S&P 500 up by a mere 0.08%. So what made it such a happy week for Citi?

Of divestiture and indebtedness
Both Citi and B of A are having banner weeks. B of A possibly down to the president's call for increased home lending and the bank's professed intention to get in on it with home lending being an easy way to make money in the current resurgent U.S. housing market, one the superbank has so far been remarkably shy of.

As for Citi, I wrote earlier in the week that news the bank had sold half its stake in Grupo Aeromexico SAB, Mexico's largest airline, might have helped shift some investor money its way: Any sign that the wayward bank is moving back to core banking and shedding questionable assets (like a large position in a foreign airline) can't help but lift its reputation in the eyes of investors.

But one thing that I missed earlier in the week, probably along with most investors, is that Citi has taken to the debt market, issuing $1.5 billion worth of 10-year notes this week. With existing long-term debt on the books of more than $239 billion, another $1.5 billion perhaps isn't so shocking, but isn't necessarily a positive sign either.

Money is cheap right now, and Citi won't have to pay its bondholders much in the way of interest rates, but I don't think the bank should be going any further into debt right now -- period, unless it has absolutely has to. And if it absolutely has to, then something's not right. I didn't see any explanation in the news from the bank explaining the debt issuance. Some sort of explanation would have been helpful, otherwise, investors just have to guess, which never inspires confidence.

But since I have to frequently remind myself of this, I'm going to remind you, my fellow Fools, of the same thing: You're in this for the long term. Checking on your stocks everyday is all well and good, but barring fundamental changes in the company, take whatever you see with a grain of salt -- sometimes a very large one.

Occasionally, you'll see the phrase "Get rich slowly" flash across the top of The Motley Fool's homepage. It's one of my favorite Foolish slogans, it and helps keep me personally focused on the long term. I strongly recommend a strong dose of it for days you feel the invisible hand of the market has slapped you down.

Looking for more Foolish analysis on Citi?
Check out our new premium report on the superbank. Andy Cross, The Motley Fool's Chief Investment Officer, will fill you in on both reasons to buy and reasons to sell Citigroup, and what areas the bank's investors need to watch going forward. For instant access to our Andy's personal take on Citigroup, simply click here now


Read/Post Comments (0) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2259223, ~/Articles/ArticleHandler.aspx, 9/2/2014 3:08:04 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement