CHICAGO, March 31, 2011 /PRNewswire/ -- Zacks.com Analyst Blog features: Citigroup Inc. (NYSE: C), Moody's Corp. (NYSE: MCO), Wells Fargo & Company (NYSE: WFC), JPMorgan Chase & Co. (NYSE: JPM) and Bank of America Corp. (NYSE: BAC).
Get the most recent insight from Zacks Equity Research with the free Profit from the Pros newsletter: http://at.zacks.com/?id=4579
Here are highlights from Wednesday's Analyst Blog:
Citigroup Sells 3-Year Senior Notes
Following last week's declaration of reverse stock split and dividend payment reinstatement, Citigroup Inc. (NYSE: C) sold 3-year senior notes worth $750 million on Tuesday, according to Thomson Reuters.
Citigroup sold the 3-year floating rate issue worth $750 million at a coupon rate of 3-month London Interbank Offered Rate (LIBOR). The bonds will mature in April 2014, yielding 93 basis points more than USD LIBOR. The new notes has been rated 'A3' by Moody's Investors Service, the ratings arm of Moody's Corp. (NYSE: MCO), 'A+' by Fitch and 'A' by Standard & Poor's.
The proceeds from the offering may be used for general corporate purposes. Moreover, Citigroup might use the proceeds for the repayment of outstanding debt securities, if any.
On March 18, the Fed allowed America's strongest banks that passed the second round of stress tests to operate independently, and set them free from government restrictions imposed during the height of the financial crisis in 2008.
In January, 19 banks subjected to the stress tests in 2009 had submitted their capital plans to the Fed. These banks were required to demonstrate that they have adequate capital to address potential losses over the next two years under various scenarios.
The second round of stress tests was basically a precautionary exercise amid the economic recovery. Also, as the banking industry swung back to profitability in 2010, big banks began pressing regulators to allow them to enhance shareholder value through dividends and buybacks.
Though Citigroup and Bank of America Corp. (NYSE: BAC), the biggest recipients of the bailout money during the height of the financial crisis, cleared off their dues, they did not announce any dividend increase immediately due to their fundamental weakness compared to its rivals.
However, last week, Citigroup stated that it will reinstate a 1 penny per share quarterly dividend. On the other hand, despite planning a slight dividend increase, BAC did not get the clearance from Fed.
This marks the strength in Citigroup's business model, reflecting the company's commitment to return value to shareholders coupled with its strong cash generation capabilities.
Citigroup has been affected drastically by the subprime mortgage crisis. To avoid bankruptcy, the company took several steps over the past two years. We believe that through the reverse stock split, investors' sentiments will be positive in the near term. Investors would be attracted toward investing in higher-priced stocks.
Citigroup is strategizing its plans and is focusing on its core businesses to support economic growth. However, growth depends entirely on banking, which offers loans to small businesses and provides capital.
Though restructuring initiatives are encouraging, the revenue headwind remains a concern. The shrinking of its business through assets sale, the CARD Act and the financial reform law will continue to challenge revenue. We believe that solid earnings at Citigroup would remain elusive until its revenue experiences decent growth.
Citigroup currently retains its Zacks #3 Rank, which translates into a short-term Hold rating. Also, considering the fundamentals, we are maintaining a long-term Neutral recommendation on the stock.
Want more from Zacks Equity Research? Subscribe to the free Profit from the Pros newsletter: http://at.zacks.com/?id=5514.
About Zacks Equity Research
Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.
Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.
Zacks "Profit from the Pros" e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Subscribe to this free newsletter today: http://at.zacks.com/?id=5516
Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Leonard Zacks. As a PhD in mathematics Len knew he could find patterns in stock market data that would lead to superior investment results. Amongst his many accomplishments was the formation of his proprietary stock picking system; the Zacks Rank, which continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros at http://at.zacks.com/?id=4580.
Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.
Follow us on Twitter: http://twitter.com/ZacksResearch
Join us on Facebook: http://www.facebook.com/ZacksInvestmentResearch
Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.
Web Content Editor
SOURCE Zacks Investment Research, Inc.