XLF, Banking and Financial Sector Stocks

» Kirk - Citigroup beats by a penny; Proftis up 23%

Dow Jones Business News
Citigroup 3rd-Quarter Profit Rose 23%, Buoyed by Consumer Business
Tuesday October 15, 7:17 am ET

NEW YORK -- Citigroup Inc. (NYSE:C - News) reported a 23% rise in third-quarter earnings, as credit card growth, mortgage refinancings and a gain from the sale of the bank's New York headquarters helped offset problem loans and a weak investment environment.

The financial-services giant Tuesday posted net income of $3.92 billion, or 76 cents a share, compared with $3.18 billion, or 61 cents a share, a year earlier.

The latest figures include a gain of $214 million from Travelers Property Casualty before its spinoff, which was completed on Aug. 20, a restructuring gain of $27 million and a loss of $114 million from realized insurance investment portfolio

The year-earlier period included a restructuring-related loss of $84 million, a gain of $64 million from realized insurance investment portfolio and a loss of $58 million from discontinued operations.

Excluding items in both periods, core income came to $3.79 billion, or 74 cents a share, compared with $3.26 billion, or 62 cents a share, in last year's third quarter.

The latest result from the nation's largest financial-services firm was a penny a share ahead of the mean estimate of analysts surveyed by Thomson First Call.

"We are exceptionally pleased with the performance of our businesses this quarter, during what has been a period of challenging business conditions," Sanford I. Weill, Citigroup chairman and chief executive, said in a prepared statement. "We generated double-digit income growth while continuing to strengthen our reserves and capital position and reduce costs.

Citigroup also recorded a third quarter gain of $323 million from the sale of its building at 399 Park Ave. in New York. That amount is included in the core income figures, and incorporated into the bank's proprietary investment activities loss of $101 million, which is part of total adjusted revenue of $ 18.77 billion. In the same period last year, Citigroup reported adjusted revenue of $17 billion.

Citigroup noted that it achieved strong results despite economic problems in Argentina and political uncertainty in Brazil, as well as "exceptionally weak equities markets."

The banking giant still faces challenges. Citigroup is under pressure from investigations by state and federal regulators into charges that it provided overly optimistic research on investment-banking clients. Citigroup may have to pay huge penalties to settle those cases, which may hurt future earnings.

"We have made progress towards the resolution of the current regulatory scrutiny, Mr. Weill noted. "During the quarter, we reached an agreement with the (Federal Trade Commission) regarding consumer lending practices of the former Associates, and we also resolved with the NASD issues relating to Winstar ( Communications Inc.). We will continue to strive to have a constructive dialogue with regulators," he added.

In the third quarter, Citigroup said earnings from continuing operations came to 72 cents a share, compared with 62 cents a share a year earlier.

The firm's credit cards business contributed income of $849 million, up 21% from a year earlier.

Income from the consumer finance division edged up 1%, as 9% growth in North America was offset by a decline in international income of 11%.

Retail banking income rose 19% amid strength across all regions except Latin America because of Argentina's difficulties.

In North America, income grew by 25% paced by higher deposit volumes and 24% income growth in consumer assets, which benefitted from record levels of mortgage refinancings and substantial volume growth in student loans.

Credit costs remained high in the global corporate and investment banking business. Corporate banking core income dropped 7% to $1.2 billion as income from capital markets and banking income fell 8%. Revenue growth of 4% and cost cuts were offset by the increase in the provision for credit losses.

Income for transaction services rose 21%, helped by reduced expenses.

But private client income declined 8%, hurt by lower asset-based fees and margin interest income resulting from sharp equity market declines.

Citigroup raised its provision for loan losses by $283 million in excess of net credit losses in the third quarter, increasing the total reserve for loan losses to $10.7 billion.

Poor corporate loans and slumping capital markets continue to hamper many other multinational banks' earnings. Earlier this month, J.P. Morgan Chase & Co. (JPM) and Bank of New York Co. (BK) warned their third-quarter results would fall short of forecasts amid a sharp spike in problem loans to telecommunication and cable companies.

-Sue Goff; Dow Jones Newswires; 609-520-7835

-- posted by Kirk

» Sinewave - Bank of America Says It Plans to Fire 900 Workers to Cut Costs

Charlotte, Nov. 19 (Bloomberg) -- Bank of America Corp., the third-biggest U.S. bank, plans to fire 900 technology and operations workers by the end of the year to cut costs.

Chief Executive Officer Kenneth Lewis, in his second year in charge, is trying to reduce expenses by $1 billion a year. The Charlotte-based company expects the economy to remain weak next year, and ``it is obvious that we can't meet our 2003 budget without affecting the personnel line,'' Technology and Operations Executive Tim Arnoult said in memo to employees Monday.

Bank of America has eliminated 9,689 jobs, or 6.7 percent of its workforce, over the past year. The latest cuts amount to less than 1 percent of the bank's 134,135 jobs as of Sept. 30.

The workers being fired are responsible for programming software, processing loans and credit requests and other back- office functions, said spokeswoman Lisa Gagnon. The Charlotte Observer reported the cuts earlier today.

Bank of America is also cutting investment banking jobs. It said last month it is cutting more than 190 corporate and investment banking jobs by yearend in the worst slump in global mergers and share sales in at least five years.

The company's shares fell 48 cents to $66.93 in New York Stock Exchange composite trading. The shares are up 6.3 percent this year.

Bloomberg.com

-- posted by Sinewave

» Thruhiker - Time to sell BTO?

BTO is up about 13% or so the last 5 or 6 trading days.

BTO has announced that they will begin to pay a 10% distribution a year subject to approval. Action was taken to close the discount to NAV. Problem is that the "distribution" will be a partial return of capital if the Fund does not earn 10%. This is misleading (although other CEFs do it) as novice investors think they are actually earning 10% a year.

I was looking for an exit strategy for this Fund; now I have one.

-- posted by Thruhiker

» Kirk - Re: Time to sell BTO?

Great minds think alike? Just last night I was considering selling some of my financial stocks I diversified from HP into back in 1999 and early 2000 when you suggested BTO.

Why is BTO recovering so much ground over the others?

<img src=http://pvcharts.quicken.com/images/chart... width=470 height=250>

<img src=http://cbs.marketwatch.com/charts/int-ad... width=452 height=366>

<img src=http://pvcharts.quicken.com/images/chart... width=470 height=250>

Strange gap in BTO. How did it perform vs FSRBX and XLF which are the two I decided to buy back in 1999 and early 2000 when we were discussing these here. I was checking my XLF last night and the gains over 1999 and early 2000 buys are about 15% before I add in the dividends it paid.

I wonder if my FSRBX fund will track BTO's jump up? It has tracked fairly close for some time.

-- posted by Kirk

» Thruhiker - Re: Re: Time to sell BTO?

I own it but don't follow it very closely.

Of the recent gain of approx 13% in the last week the discount to NAV closed from approx 16% to 9% which accounted for a bit more than half the gain. The remainder was market gain.

-- posted by Thruhiker

» SteveT - Sears' Stock Up With Citigroup Credit Buy

Sears' Stock Up With Citigroup Credit Buy
Wed Jul 16,11:18 AM ET
Add Business - AP to My Yahoo!

By EILEEN ALT POWELL, AP Business Writer

NEW YORK - Citigroup is buying the credit card business of Sears, Roebuck & Co. in a $3 billion deal that allows Sears to return to its retailing roots and further bolsters Citigroup's position in the credit card industry.

The sale of Sears' $30 billion credit portfolio will put Citigroup — already the nation's largest financial institution — ahead of MBNA in total managed debt. The companies said the deal, announced Tuesday, is expected to close by year's end.

Investors embraced the move by Sears, pushing the retailer's stock up $3.67, or 10.5 percent, to $38.65 in Wednesday morning trading on the New York Stock Exchange (news - web sites) — its highest level since just before problems with the credit unit emerged last October.

Shares in Citigroup declined $1.06 to $45.77. The company announced Wednesday that 70-year-old Sanford I. Weill is giving up his CEO's job and will be succeeded this year by longtime confidant Charles O. Price.

Sears, which is based in Hoffman Estates, Ill., will actually realize $6 billion from the sale of its portfolio, the country's eighth-largest. Besides the $3 billion cash from Citigroup, Sears will retain $3 billion in capital it had in the portfolio as a reserve against nonpaying accounts.

The sale also provides Sears an influx of badly needed cash, but deprives it of an important, stable source of income at a time when the retail industry is struggling.

Sears' credit card business has 59 million accounts, including 25 million that are active.

The portfolio would raise Citigroup's total managed debt to nearly $169 billion. The next largest is MBNA's $107 billion portfolio. The Sears portfolio is made up of 58 percent Sears cards and 42 percent MasterCards.

Sears said it would use the $4.5 billion after-tax proceeds to reduce debt, fund general operations and to return cash to shareholders.

The deal must be approved by federal and state regulators.

Shortly after the transaction was announced, the Standard & Poor's credit agency downgraded Sears' debt to BBB from BBB-plus.

"The downgrade reflects the absence of this historically important foundation to the credit rating and its operating income (approximately $1.5 billion in 2002), and a greater reliance on a retailing business that has a very challenging future," S&P analyst Gerald Hirschberg wrote.

Citigroup said the purchase also includes Sears' Financial Products business and credit card facilities, with approximately 8,300 employees.

Robert B. Willumstad, president of Citigroup and chairman and chief executive of Citigroup's Global Consumer Group, said during a conference call with analysts that the purchase would give Citigroup greater access to the Hispanic market, which the New York bank has sought to woo.

"Sears is a unique franchise, as 60 percent of U.S. households are Sears customers, including a significant Hispanic customer base — a key focus of our consumer business marketing efforts," he said.

Sears said in March it was looking to sell the credit card division to focus on its retail operations. A company spokesman would not identify any other bidders.

Sears said that as part of the transaction, Sears and Citigroup will enter into a marketing and servicing alliance with an initial term of 10 years.

Under the alliance, Citigroup will provide credit and customer service benefits to Sears' proprietary and Gold MasterCard holders, Sears said.

The retailer said it expected to receive about $200 million in annual performance payments from Citigroup for new account and credit sales generation activities. In addition, Sears expects to realize annual savings of more than $200 million as Citigroup will absorb costs associated with Sears' zero percent financing program.

"This is a great deal for Sears, its customers and shareholders," said Alan J. Lacy, Sears chairman and chief executive officer. "Our customers will enjoy broader credit and financial products opportunities and continued high levels of service, while Sears gains an additional source of profitability and greater financial flexibility."

Sears reported $35.7 billion in merchandise sales and services revenue in 2002.

-- posted by SteveT

» Kirk - Good Earnings Numbers from the Group

Morgan Stanley greatly exceeds Wall St. forecast
(8:11 AM ET) NEW YORK (CBS.MW) -- Morgan Stanley(MWD: news, chart, profile)reported third-quarter net income of $1.27 billion, or $1.15 per share, up from $611 million, or 55 cents per share. The company soundly beat the forecast of 69 cents per share in a survey of analysts by Thomson First Call. Changes to the terms of the company's equity-based compensation program made in the third quarter increased net income by $350 million and diluted earnings per share by 32 cents. Revenue was $5.3 billion, up 13 percent from the year-ago period and 4 percent ahead of the second quarter. The investment bank cited a pick up in equity underwriting and retail securities, and an "outstanding" quarter in its bond business. Shares of Morgan fell $1.23 to $51.15 on Monday.

Lehman's Q3 earns rise well above expectations
(8:07 AM ET) NEW YORK (CBS.MW) -- Lehman Bros.(LEH: news, chart, profile)reported third-quarter net income of $480 million, or $1.81 a share, up from 70 cents a share in the year-earlier period, and above the average analyst estimate compiled by Reuters Research of $1.35 a share, amid strength in customer flow activity and an improvement in the market cycle. Net revenue rose 74 percent to $2.35 billion, matching analyst forecasts, boosted by a doubling in capital markets revenue and a substantial improvement in revenue from its equities business. The stock closed Monday down 44 cents at $70.21.

http://cbs.marketwatch.com/news/story.as...

  Date       Kirk    S&P500   Delta
2003 YTD    +49.7%   19.2%    30.5%  as of 9/21/2003
 

                                Kirk   S&P500+  NASDAQ 
4.5+ Yrs 12/31/98 to 09/21/03  129.5%  (10.0%) (13.1%)
Annualized Annual Return        19.2%   (2.2%)  (2.9%) 
 
+with dividends reinvested. All Numbers unaudited. 
Click for a free issue of my newsletter .

-- posted by Kirk

» Kirk - S&P500 vs FSRBX vs XLF

Lets see how the bank funds we highlighted for purchase back in December 1999 have done.

Clearly the money I diversified out of tech (quite a bit of HP back between 1999 and mid 2000) and put into XLF and FSRBX has done well for itself.

<img src=http://cbs.marketwatch.com/charts/int-ad... width=452 height=366>

With the announcement yesterday of a big merger, it seems what we were hoping would happen in 2000/2001 with banks but was delayed by the bear market is now happening.

-- posted by Kirk

» Kirk - Re: Thruhiker's BTO

Nice gains on your BTO!

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Your BTO beat the two funds, XLF and FSRBX, that I went with. I wonder if it was the discount or is the discount still there?

-- posted by Kirk

» Kirk - JPM/ONE merger implications for payment processors

-- posted by Kirk