Why Citigroup Blasted Off to the Moon This Week

Not only has it been a beyond banner week for the market, it's also been beyond a banner week for Citigroup (NYSE: C  ) . Nearing the end of the last trading day of the week, the banking behemoth is up a blistering 9.46%. What do investors have to thank for this portfolio-boosting performance?

In part an overall happy market, but also happy dreams for positive Federal Reserve stress-test results -- dreams that seem to be coming true.

The tale of the tickers
But before we get into that, here's a quick look at where Citi's peers and the market overall are shaking out for the week:

  • Bank of America is up a big 6.61%. No slacking here.
  • Wells Fargo (NYSE: WFC  ) is up an even 3%.
  • Not too far behind Wells, JPMorgan Chase is coming in at 2.66%.

The market finished solidly in the green overall, as well, with the S&P 500 up 2.28%, the Dow Jones Industrial Average up 2.33%, and the Nasdaq up 2.49%.

Good news, with more potentially to come
Everyone knows the Dow hit an all-time high this week, so that's one factor contributing to Citi's brilliant share-price performance: More overall investor money moving into stocks means higher indices, and higher indices entice more investors to put more of their money into the market. It's a virtuous circle.

But I think the primary factor affecting Citi's boom revolves around the Fed's second annual set of stress tests, the first results of which were announced yesterday. How did Citi do?

In a nutshell, the superbank passed with flying colors, coming in with a Tier 1 common-equity capital reserve, as measured against risk-weighted assets, of 8.3%. That's huge, easily beating JPMorgan Chase's (NYSE: JPM  ) 6.3%, Bank of America's (NYSE: BAC  ) 6.8%, and even Wells Fargo's (NYSE: WFC  ) 7%.  

Last year, Citi failed its stress test. Hopes were high for this year, and those hopes are paying off. Now, Citi investors will be on pins and needles until next Thursday, when the Fed will announce results from the second portion of its stress-tests: results that deal specifically with what Citi can return to investors as a reward for performing well. (Citi has already announced a plan for $1.2 billion in share buybacks, pending said Fed approval next week). 

But regardless of what happens, always remember that you're in the market for the long term. Investing Foolishly means ignoring the short-term ups and downs of stock performance and keeping an eye on company fundamentals. 

Looking for in-depth analysis on Citigroup? Check out our new premium report on the superbank, and let Matt Koppenheffer -- The Motley Fool's senior banking analyst -- fill you in on both reasons to buy and reasons to sell Citigroup. He'll also clue you in on what areas investors need to watch going forward. For instant access to Matt's personal take on Citi, simply click here now.


Read/Post Comments (0) | Recommend This Article (3)

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: 2302618, ~/Articles/ArticleHandler.aspx, 8/31/2014 2:34:10 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