Citigroup Trading forecasts and signals

The session on July 15, the main American stock exchanges ended in the green zone. The S&P 500 rose 1.92% to 3,863 points, the Dow Jones rose 2.15%, the Nasdaq rose 1.79%. All 11 sectors of the S&P 500 closed in the black, representatives of the financial industry took the lead (+3.51%). Producers of non-cyclical consumer goods (+0.4%) and companies from the utilities segment (+0.2%) lagged behind the benchmark in terms of growth rates.Company newsAccording to the WSJ, Elliott Management acquired 9% of Pinterest shares (PINS: +16.3%).Citigroup (C: +13%) reported better than market-wide expectations for the second quarter.UnitedHealth Group (UNH: +5.4%) beat forecasts for revenue and earnings per share for the second quarter and raised its forecast for the fiscal year.We expectMarket participants estimated the probability of a Fed rate hike by 100 bps in July below 30% after a number of statements on this issue from official representatives of the regulator with voting rights in the FOMC. WSJ orients readers to the fact that the Fed will raise the rate by 75 bps at the end of the July meeting, so as not to aggravate the signs of weakening economic activity that are already emerging. Representatives of the Federal Reserve's Open Market Committee are aware that the likely continuation of aggressive tightening of monetary policy may be beyond the strength of both the stock market and the economy as a whole. Recent surveys and market data indicate a slight decrease in inflation expectations. Coupled with lower commodity prices, tighter financial conditions and improved macroeconomic data, this suggests that the peak of inflation has passed. At the same time, concerns remain in the market that the Fed's course may turn out to be wrong. The July rate increase by 75 bps, which has already been taken into account in the quotes, will cause an increase in the interbank rate to 2.25–2.50%. This range is already close to neutral values. If the assumption that inflation has peaked is not confirmed, the Fed is highly likely to continue to actively move rates up. At the same time, it follows from surveys that expectations of a recession in the next 12 months are intensifying.Trading on July 18 at the sites of Southeast Asia ended in the green zone. China's CSI 300 gained 1.04%, Hong Kong's Hang Seng rose 2.63%. The Japanese stock exchange was closed due to the celebration of the Day of the Sea. Eurostoxx 50 has been growing by 1.13% since the opening of trading.Brent crude futures are quoted at $103.9 per barrel. Gold is trading at $1,716.5 per troy ounce.In our opinion, the S&P 500 will hold the upcoming session in the range of 3840-3920 points.MacrostatisticsToday, data on the housing market index for July from the National Association of Home Builders will be presented (forecast: 66 points against June 67).Sentiment IndexThe sentiment index rose by 2 points to 29.Technical pictureThe closest support for the S&P 500 remains the range of 3600-3660 points. The RSI and MACD indicators signal a downward reversal, but the index may try to "pierce" the upper boundary of the descending channel before returning to the "bearish" trend. We do not exclude the possibility of quotes entering the 3960-4000 corridor.In sightNetflix, Inc. (NFLX) will report quarterly results on July 19 after the market closes. The consensus forecast predicts revenue growth of 9.4% YoY, to $8.03 billion, with a decrease in GAAP EPS from $2.97 to $2.96. Note that market expectations look very cautious compared to the company's own guidance, which assumes revenue of $8.05 billion with EPS at $3.00. The latest data from Apptopia, which JPMorgan cites, indicate weak trends towards changing the audience of the streaming service in April-June, even despite the successful release of the new season of the popular TV series "Very Strange Things". We do not exclude that the net outflow of subscribers may slightly exceed the 2 million stipulated in the consensus. The reaction of investors to the streaming service's report will depend on whether the company's guidelines on the dynamics of subscribers for the third quarter coincide with market forecasts that suggest an expansion of the audience in the range of 1.5–1.9 million. These values look achievable, but there is no reason to hope for more optimistic forecasts yet. We believe that the expansion of the Netflix subscriber base constrains both the consumer's desire to optimize entertainment costs, and competition from Apple (AAPL), Disney (DIS) and Warner Bros. Discovery (WBD). Special attention will be paid to management's comments on operating marginality due to the high rates of wage growth in the United States.The largest electric car manufacturer in the United States, Tesla, Inc. (TSLA), will publish its second quarter reports on July 20. The general market consensus puts the company's revenue at $16.5 billion (+38% YoY) with an increase in EPS to $1.82 (+25.7% YoY). At the same time, sales are expected to decrease from 310 thousand in January-March to 263 thousand. If these expectations are met, Tesla's series of quantitative sales growth, which lasted eight consecutive quarters, will be interrupted. Since March 28, the company had to stop production in China for three weeks, and after that production was resumed in limited volumes.On Friday, July 22, the financial results for the second quarter will be published by the international payment system American Express Company (AXP). Despite the expected revenue growth of 18% YoY, to $12.51 billion, the consensus forecast assumes a drop in GAAP EPS by 13.7%, to $2.42. The pressure on profits is exerted by an increase in expenses in conditions of high inflation, as well as the need to increase reserves to cover possible credit losses with an increase in the volume of credit card loans with a simultaneous deterioration of the macroeconomic situation. The increase in interest rates and the active demand for services during the tourist season are the key drivers of AXP's interest income growth, which is expected to be 20.9% ...

About the companyCitigroup (C) is a leading financial holding company in terms of international coverage. It operates in 160 countries, providing consumer, corporate and investment banking services. It is one of the largest credit card issuers, as well as the primary dealer of the US Treasury.Investment attractiveness factors1. In 2022, the main driver of income growth for companies in the banking sector is the resumption of lending growth and normalization of interest rates. In the first quarter, Citi's net interest income grew by 3% year-on-year, and the net interest margin improved to 2.05%, surpassing the result of the same period in 2021 of 1.95%. Net interest income is expected to grow by 4.8% by the end of the year.2. The impact of macroeconomic factors and market correction significantly cooled the activity of companies in IPOs, which was reflected in the general drop in commission income for underwriting and consulting for banks. Citi managed to compensate for this through trading operations, taking advantage of increased market volatility and earning 173% more in commodity markets than at the beginning of last year. Revenues of the key segment of liquidity management (Treasury and Trade Solutions) increased by 18%. Although the profit decreased by half in annual terms, the bank managed to achieve a strong quarterly growth of 36%. In the second quarter, the volatility factor will support the demand for asset management services.3. Since 2021, Citi has been implementing a strategy to simplify the structure and increase margins. The bank sells less efficient retail banking units in nine markets, including Mexico, Eastern Europe and Asia. The bank expects to gain about $12 billion from sales, which will be reinvested in the development of a more marginal segment of services for institutional clients, providing 58% of revenue and achieving revenue growth of 25% compared to the fourth quarter of 2021. In the medium term, a partial sale of the business will improve the capital structure. For example, the recently completed sale of the retail division in Australia may increase the level of core equity capital adequacy of the first tier (CET-1) in the second quarter. Long–term growth factors are restructuring, digitalization and a shift in focus to business development in more attractive financial centers - Singapore, Hong Kong, the UK and the Persian Gulf countries.4. In January-March, the bank returned about $3 billion to shareholders through share buybacks and $1 billion in dividends. The bank pays $0.51 per share quarterly, with a payout ratio of 24%. The dividend yield is 3.89% per annum, with an average 2.99% in the industry. Citi shares are trading at a noticeable discount and have a greater growth potential both in comparison with the average annual values over the past five years and in comparison with similar indicators from competitors: P/BV is one of the lowest in the sector at 0.56x with an average value of 1.41x, forward P/E is 7.6x with the industry median is ...

Despite the fact that large American banks exceeded analysts' expectations for profits, this did not stop the decline of the banking sector.At the moment, reports from 5 of the 6 largest US banks have been released:JPMorgan (JPM);Citigroup (C);Wells Fargo (WFC);Goldman Sachs (GS);Morgan Stanely (MS).The reports are good, why is everything falling?Analysts' expectations were underestimated due to the military actions in Ukraine, so it was not difficult to exceed them. Before the reports were released, it was unclear how much banks would suffer as a result of all this, and the market expected the worst.If you look at the dynamics of profit and compare it with the corresponding quarter of last year, then all banks showed a serious drop. For example, the profits of JP Morgan and Citigroup fell by more than 40%. Wells Fargo showed a decrease of only 20%: it is less focused on the Wall Street divisions, and is focused on retail and commercial customers in the United States.Why did profits decline so sharply?Banks give two reasons:Since the end of 2020, JPMorgan has been releasing its reserves all the time, which has contributed to strong performance. But in the 1st quarter of 2022, the company had to replenish these reserves by almost a billion.The impact of the Russian-Ukrainian conflict. Due to increased volatility and correction in the markets, some banks are experiencing a decrease in profits in the trading and investment banking departments.At the same time, the demand for mortgages has decreased significantly, which also puts pressure on banks.And what about investment banks?JPMorgan, Goldman Sachs and Morgan Stanley have greatly exceeded analysts' expectations in both profit and revenue. This was facilitated by the increased volatility of the markets against the background of Ukraine. In addition, these companies do not need to allocate a large share to reserves due to the specifics of their business. However, they are still under pressure in price due to problems in other segments, for example, in underwriting.What awaits the US banking sector in the near future?Since the beginning of the year, the banking sector has sunk by more than 15%. Investors are afraid of a correction in stock markets due to an increase in the key rate, as well as due to geopolitical problems. Banks are also nervous and raising reserves.Investment banks now look more attractive than their competitors in the sector. But everything depends on further events. The market may react to a serious increase in rates by reducing the value of shares. After all, unlike commodity companies, banks cannot play off all inflationary risks and are highly dependent on the state of the global ...

Verizon CommunicationsThe telecommunications company Verizon Communications refers to the enterprises of the main market of the States that pay regular dividends to their depositors. The average return on these payments is 4.8%. Now we should talk in more detail about this company and, in accordance with the results of the analysis, decide whether it is worth investing in it or not.The total value of the telecommunications industry is estimated at $1.7 trillion. This is an impressive global market in terms of reserves, a third of which is concentrated in the United States. Verizon is one of the companies controlling this market in America. Competing organizations are AT&T and T-Mobile. The three of them occupy about 99% of the telecommunications market in America.The only question that remains unclear is why, if the size of this market is so impressive, it is dominated by only three companies? The answer is simple – all three giants spend millions of dollars a year on upgrading and equipping their own networks. For example, Verizon spent about $18 billion in 2021 on investments in itself. The funds were allocated for 5G licensing, the construction of new communication towers, the laying of optical fiber, the modernization of satellites and the expansion of the company's fleet.Today, the company has a truly colossal infrastructure, and anyone who decides to compete with it would have to spend billions of dollars just to match its size, and it is unlikely to achieve such impressive performance results. Having such a form of ownership, no cataclysms in the world of economics and finance have the slightest significance for Verizon.About 5G and plansIt cannot be said that Verizon is growing like a mushroom after the rain. The company's revenue has increased by only 2% over the past decade. In the coming years, thanks to the introduction of the 5G network, the company will be able to increase this figure.This is a format that provides better data transmission than 4G. Technology is the future. Autonomous vehicles, the Internet of things, AI – all these concepts are from the sphere of 5G, well, or somewhere nearby. All this cannot become a reality without this format.In 2021, the demand for 5G has grown significantly. By the end of the 3rd quarter, more than a quarter of the enterprise's corporate clients used equipment with support for this format. The introduction of new technologies led to an increase in sales of special equipment by 34.8% compared to the 3rd quarter of 2020. More and more customers are switching to a new format, while the company's revenues are beginning to grow seriously.Not only 5G-enabled equipment, but also wireless communications in a new format are attracting more and more customer attention. Innovations allowed Verizon to earn $17.1 billion from the wireless segment alone, and in Q3 2020 this figure was at the level of $16.5 billion. According to analysts' forecasts, 5G will continue its victorious march across the planet in the next fiscal year, and the percentage of revenue from this segment will grow to 3%, and by 2024 – to 4%.Dividend benefitsVerizon is a stable and serious business that provides its depositors with reliable dividend payments on a regular basis. As a percentage, the dividend yield approached 4.93%. The company's management decided to pay dividends to its shareholders regardless of financial indicators for the past reporting period. If Ford reduced or canceled payments in 2020, Verizon also increased the amount of payments.The issuer pays and raises dividends because they can freely generate cash flow. For example, with low revenue, such as in 2020, this figure amounted to $23.6 billion, which is 32.4% more than in 2019.For the 3rd quarter of 2021, the company accumulated a cash flow of $17.3 billion.Verizon's strong financial performanceDividend payments and constant receipt of free cash flow are only a small part of a large number of strengths of this enterprise. Another predominant factor is powerful fundamental data. For example, in accordance with the results of 2021, the main financial indicators not only exceeded the previous ones, but also the reporting ones for 2019:For Q3 2021, Verizon's revenue was at the position of 99.5 billion dollars;For the same period in 2020 – 94 billion dollars;In the same time period of 2019 – 97.1 billion dollars.Such outstanding figures were obtained due to the high attractiveness of the company's developments and services for customers. And all this, despite the pandemic raging in the world.Another development factor is the transition of a huge number of enterprises around the world to remote work. This was an incentive for a serious expansion of the Verizon Fios Internet service. For the 3rd quarter of last year, the consumer revenue of this segment increased by 4%, which in monetary terms amounted to $29 billion. In the reporting period, 98 thousand consumers joined the segment on a permanent basis.The management methods of the enterprise also play an important role in obtaining regular profits. In 2020, with the outbreak of the pandemic, America went into lockdown. The corporation at this time began to actively accumulate cash. By the end of the pandemic year, the company had an impressive $22.2 billion airbag at its disposal. If we compare, in the same period of 2019, this figure was only 2.6 billion dollars.Today, the fears that the pandemic has stirred up are gradually disappearing, and the company will use the accumulated funds to pay dividends and reduce the amount of debt that grew in 2021, when the company spent part of its funds in the amount of $53 billion on modernization for the development of 5G networks.It is impossible without a drop of negativityThe only thing that confuses in all the victorious tirade that we have given above is the debt of the enterprise. For the period of the 3rd quarter of 2021, the cumulative figure was 151 billion dollars. And this indicator has grown significantly, since for the same period in 2020 it was equal to 129 billion dollars, and today it is 78 billion dollars higher than the total capital of the company. The main long-forming link in this plan is 5G communication.If debt obligations are not taken into account, the company spent almost $3 billion on interest expenses in 2021. This is 13% less than for the same period in 2020.According to the combined opinion of experts, it was this debt indicator that caused the decline in the value of the company's shares last year. However, with the end of investments in the development of 5G, the company will easily send funds from its own free cash flow to cover debts. According to forecasts, the main part of it will be closed until 2025.What to do with assets?The company is not the last link in the telecommunications business of the States. Despite a small lyrical digression about debts, it is worth saying that investors need to pay close attention to the company's assets. Free cash flow should significantly reduce debts against the background of the introduction of 5G technology, as well as significantly increase profits. Against the background of the P/E multiplier equal to 11, there is an opportunity to attract investors. Another advantage is the high dividends.Today, the company's assets are returning to growth after a prolonged correction. Buyers managed to organize a defense in the area of $50, from which the asset decisively jumped back to increase, and reached $54.6. If the price remains above the $52 level, we should expect another jump to $57. The main goal is $67.IntelThe start of the new year is a great time to look for assets that have sunk somewhat in price in the last reporting year, but have a serious potential for growth. Of such securities, Intel's assets attract special attention. Over the past few years, the company has lost a significant part of the chip market to its competitors, but, as before, controls a serious part of it. The general director of the enterprise is seriously concerned about restoring the former power of the enterprise. Let's talk further about the prospects for its development.AMD is considered a significant competitor of the company today, having managed to oust the issuer from a whole range of world markets. According to expert opinion, over the last five years, the share of the competing Intel processor market has decreased by almost 20% – from 80% to 60%. The company has seriously lost its position, but it still has 60% of the market, estimated at $425 billion. Considering that semiconductors are a master key to high technologies, the enterprise today has enough resources to maintain its own positions further, as well as to regain those lost over the years.According to Intel reports, the demand for manufactured products is still quite high, and in each of the divisions of the enterprise. The company's technologies are in demand not only in data centers, but also for autonomous transport, as well as the Internet of Things. In Q3, the issuer's revenue increased by 5% year-on-year, and the profit on the asset increased by 64%.After the publication of the quarterly report of Intel CEO, it was reported that according to their expectations, the financial performance of the company will only improve from year to year. In December last year, the issuer announced plans for a public offering of the Israeli company Mobileye, which develops driver assistance systems to reduce the risk of a collision. According to the most conservative estimates, the value of this enterprise after entering the inter-market may approach $50 billion. After the listing, the company will retain a controlling stake in assets, and the manufacturer does not plan to change anything in the structure and management.Bringing Mobileye to the interbank market is one of the steps that will bring the company closer to the leading positions. The company wants to restore leadership in the industry by 2025. To do this, another method of manufacturing chips is being introduced. The company is expanding much more slowly than the competing AMD, since all actions are carried out at the expense of its own resources, including development, production. To speed up the process, the company plans to buy a number of components from TSMC, which should stimulate active chip development.Plus, the company will spend $20 million to build new microchip manufacturing plants in Arizona. The company also plans to form a foundry-type division for closer and more profitable cooperation with enterprises engaged in the development of semiconductors, but in need of a reliable chip manufacturer.The company generates a stable cash flow. For example, in the last quarter it amounted to $17 billion. This allows the company to pay stable dividends, as well as constantly increase their size. Over the last five years, payments have increased by 32% of own cash flow. This allows you to further increase payments.The problem is still thereToday, the story of the metaverse is coming to the fore for many enterprises of the same sector. Intel has not stayed away, and also plans to join this race. However, there may also be some difficulties here, since the main competitor – Nvidia is also planning to start development in this direction. The company dominates the GPU market, which is a significant advantage for it in the field of metaverse development.Success in any case will depend on the data centers. Revenue from these segments increased by 10% last year, and the indicator was recorded only for Q3. At the same time, it was found that AMD has set a fresh record in terms of profitability in this segment. This is a direct statement that Intel may have some difficulties in this matter.Even despite all the efforts of the company's management to improve its own products, product development cycles, in particular, chips, take from 3 to 5 years. That is, in the near future, it is simply impossible to return to the Intel market as a leader.However, it is not desirable to completely exclude this situation. The company has been a leader in the industry for more than one or two years, and continues to bring impressive revenues even in this situation. Including, even more than the notorious AMD. However, investors are not sure that the issuer has gained enough power to return to service.A little bit about financial indicatorsThis area of the company is also not very happy. Over the past 3 reporting quarters of 2021, the company in general has grown by almost 1% compared to the same previous period. The issuer's net profit amounted to about $15 billion. Due to the income from capital investments and reduced tax expenses, the company managed to reduce option costs by almost $4 billion.In accordance with forecasts for the whole of 2021, lower incomes are positioned than in 2020. This indicates a weak growth in asset prices over the last reporting period. It was only 10%, while the S&P500 showed 31%. The issuer's price-to-profitability ratio is close to 10, which is seriously lower than AMD's profit multiplier = 46 and the P/E multiplier =92 for Nvidia.In line with analysts' expectations, Intel is entering another weak year, and even regardless of the rather powerful potential. Experts' forecasts say that assets will fall in price by almost 30%, and revenue will remain in its positions.It is premature to talk about the acquisition of assets at the moment. The company is currently fighting for the right to return to its former heights, and this process will take quite a lot of time. Today, the paper is effective only in the long term, because it will be in a drawdown for a long time. In a short time, it is better not to consider this asset as profitable.About reporting for the past weeksCitigroupAt the very beginning of 2021, analysts predicted quite serious growth for Citigroup. It's a pity, but the predictions were not destined to come true, because the paper went into decline. Net profit of assets for Q4 2021 decreased by 26.4% year-on-year and amounted to $3.17 billion or $1.46 per paper. Revenue in the quarter increased by 1.1% and reached $17.02. According to forecasts, this figure was at the position of $16.85 billion.Summing up the results of 2021, it should be said that the profit increased by 2 times to $22 billion. Last year, the bank paid dividends to shareholders for 56% of its own profit. Today, the company's dividend yield exceeds 3% and is considered one of the most powerful in this sector.Regardless of the positive indicator of the report, the market is again controlled by sellers. After the area of $68.5, the asset fell to the price of $64.5. New purchases can be made only after the paper rises again to the $66 mark, and then its target will be around $80.NetflixIn accordance with the reporting for the 4th quarter of 2021, the company showed rather weak results, thereby greatly annoying investors. One of the world's largest streaming services announced the expectation of a decrease in the growth rate of paid subscriptions. After the release of the report, assets began to decline sharply.The reporting period showed an increase in the number of customers by $8.28 million, in total to 221.8 million people. According to the forecasts of the company itself, the increase should be at the position of 8.5 million people. Netflix's revenue showed an increase of 16%, if we take into account last year's similar period. Net profit in Q4 increased by 12%, which in monetary terms amounted to $607 million.As before, the company is on the waiting list, and no action will be taken in the near ...

The fourth largest US bank by assets, Citigroup Inc. (C), which is also widely represented abroad, reported for the fourth quarter of 2021 a decrease in diluted earnings per share by 24% YoY, to $1.46. However, this result was above the consensus at $1.39. The group's net profit decreased by 26% YoY to $3.17 billion, which was due to a zero change in net interest income of $10.82 billion, while operating expenses increased by 18% YoY to $13.53 billion, amid an increase in compensation costs and marketing costs. This offset the increase in non-interest income by 1% YoY, to $17.02 billion.The disbandment of reserves for possible credit losses in the amount of $465 million did not have a significant impact on the amount of net profit. In addition, this source of income is of a one-time nature. For the whole of 2021, Citigroup's profit increased by 99% YoY, to $21.95 billion, while revenue decreased by 5% YoY, to $71.88 billion.The bank's net revenue for October-December increased by 1% YoY, to $17.02 billion, which exceeded the consensus forecast of $16.84 billion. The net interest margin for the whole of last year was 1.91%, having decreased by 2.63% YoY. Revenues of the large institutional Clients segment (Institutional Clients Group) increased by 4% YoY, to $9.87 billion. Most noticeably, revenues from investment banking increased by 51% YoY. Income from capital markets transactions (Principal Transactions) for the fourth quarter fell by a significant 25% due to a reduction in the amount of funds received from servicing fixed income instruments (-22% QoQ) and equity transactions (-36% QoQ). The revenues of the consumer lending segment (Global Consumer Banking) decreased by 6% YoY, to $6.94 billion, the most noticeably decreased revenues from retail. The revenue of the corporate segment has been growing throughout the year, but its share in the overall indicator is still small.The capital adequacy level of Citigroup has increased to 12.2%, which ensures the stability of the business and allows the issuer to resume the share repurchase program in the current quarter and steadily transfer dividends. The company can improve its financial performance by boosting lending due to improved consumer sentiment. An increase in the yield of long-term US Treasury bonds can accelerate the growth of net interest margin.We expect that in 2022 the bank will continue to optimize costs.Citigroup sells its retail units in 13 regions of Asia and Eastern Europe. The main goal of the reorganization is to simplify the structure of banking operations and focus on the development of the most marginal areas of activity. Citi will continue to provide services to institutional clients in all countries of its presence, and in terms of retail business will focus on the development of activities in such global centers of private capital management as Singapore, Hong Kong, the UAE and the UK. The proceeds from the partial sale of the retail business will allow Citigroup to increase investments in the reorganization. As a result of the transactions, which will be closed within a few years, the bank expects to receive about $7 billion.Our base target price for Citigroup Inc. (C) stock is $85. We recommend buying paper, because during the economic recovery, the financial sector and "value" stocks are able to show steady growth. With the development of an optimistic scenario, Citi quotes may rise to $101, in case of correction, the stock may fall in price to ...

CitigroupThis is one of the largest bank holdings in America, providing clients of various sizes with a full range of financial services. The company has its own representative offices in various countries, including North America, Asia, Europe, the Middle East and Africa.In 2020, the company was plagued by a whole series of problems. First of all, it is worth remembering that the employees of the credit department of the enterprise mistakenly transferred 900 million credit dollars to Revlon, which demonstrated the low degree of modernization of the company. A little while later, the regulator presented the bank with a fine of $ 400 million, presenting an obligation to eliminate shortcomings in the security system. Finally, the stable position of the company was undermined when CEO M. Karbot retired earlier than the previously agreed deadline.The beginning of 2021 was a time of hope for the company. At that time, D. Fraser came to the post of general director of the company, who immediately decided to start her activity with the restructuring and renewal of the company. First, the head decided to give up 1 franchise, in her opinion, pulling the bank to the bottom. She believed that it was best at this time to focus on franchises that bring decent profits. It was also decided to focus on capital management, to a greater extent in the international segment. Forecasts for the restoration of the stability of the enterprise and its high performance encouraged investors, and the company's securities immediately began to rise in price.However, this trend did not last long. Since the middle of 2021, paper has become cheaper again. The main reason for the fall is the insufficiently impressive financial report, which showed that the company's expenses increased, while market conditions significantly tightened. The company had to sell its consumer banking business in Australia. In the 3rd quarter of the same year, there was a loss in the tax system in the amount of $ 68 million.After this situation, the company announced the closure of the consumer division in Korea, which threatens with penalties in the amount of $ 1.5 billion. The next blow for the company and investors was the statement by Mark Mason, the company's CFO, about the termination of the asset repurchase process due to new regulatory sanctions regarding risk management in the derivatives market.Three perspectives for a short timeShould we consider the assets of Citigroup and JPMorgan as promising?All these problems make us doubt the need to take seriously both the company itself and its shares. Next, let's talk about several catalysts that can radically change the position of the company:We are waiting for the report for the last quarter of fiscal year 2021. He will show how effective the company's work has been over the entire period, what forecasts he makes to himself, as well as what plans the company has for further asset repurchase.We are waiting for the "Investor Day". This event, scheduled for March 2, 2022, which will allow the bank's management to outline its own plans and prospects in detail. Plans for the coming metamorphoses, the real goals that the company sets for itself, what expenses are planned, as well as what profit the company expects in the near future will be announced here.We are waiting for a decision on franchises. Further release of franchises will lead to the release of about 4.3 billion dollars of capital. If these steps are successful, then sales in Australia and Korea will become higher.A few more advantagesIf we take into account the general reasons that should be taken as a basis for the acquisition of assets, then one of the most important is the low cost. It is one of the largest banks with more than 4% of the American market deposits, trading at about $63 per asset, and having a book value of 80%. In accordance with analysts' expectations, the indicator should be similar in the 4th quarter of 2021. Even with such an increase, the cost of paper will remain at a completely acceptable level than that of competitors. For example, Wells Fargo TBV has it close to 140%.At the moment, the company's dividend yield is above 3%, which is quite an impressive parameter, higher than that shown by other US banks. This is an excellent passive income, accumulated in the future until the end of all transformations. However, it must be said that Citigroup would rather buy back assets than raise and pay dividends. However, if the situation stabilizes in the near future, it is expected that the dividend yield will increase.By the 2nd half of the last month of 2021, the next wave of asset growth was observed. After leaving the $46 area, it rose to $54.4. Further growth is planned to reach $ 56.5, and up to $ 160.JPMorgan ChaseThe announcement of the US regulator to reduce the financial assistance program and tighten monetary policy was a real blow for JPMorgan Chase. Do I need to consider the company's shares as promising for investments? Let's talk about this further.JPMorgan Chase is the largest of the State banks, with assets of at least $3 trillion. If we compare, the second largest US bank by capitalization has a similar indicator of $ 2.4 trillion.JPMorgan Chase is the world's largest bank not only in terms of capitalization, but also in terms of size. The issuer owns more than 4,900 branches operating on all continents. The company provides a full range of services to large and private clients, starting with conventional or mortgage lending for asset management and investment banking.Among the main advantages, it is worth noting the extensive diversification of the business, which helps it successfully resist its competitors and global economic crises. For example, in 2020, during the crisis caused by the pandemic, most American companies showed rather weak results. Against this background, JPMorgan Chase's increased revenue and return on equity, which increased by 12%, seemed quite impressive.Another advantage is the high digitalization of business. Four years ago, the bank announced the launch of a new strategy aimed at making the digital sphere convenient for customers and for the bank, and has recently achieved significant success. The company also pays a lot of attention to the development of the ESG concept, requiring contractors to do the same.Inflation and bankingInflation, which is growing at an active pace, requires the regulator to make urgent decisions. In accordance with the Fed's plans, in 2022 there is a very real probability of an interest rate increase by 3 times at once. This is generally useful for banks, because it allows you to increase the percentage of free income, but not in all cases. Sometimes an increase in interest rates seriously harms financial companies.For example, an overly active increase in interest rates can seriously reduce the net interest income of an enterprise due to the discrepancy between short-term and long-term obligations.High interest rates will invariably hit borrowers who already have loans with floating interest or those whose rate changes in accordance with changes in interest rates offered by the Central Bank. All this will undoubtedly damage the company.About financial resultsAt the end of the 3rd quarter of 2021, JPMorgan showed impressive results in terms of revenue. This parameter increased by 2%, and in terms of profit per asset by 25%. Such powerful results were the result of the improvement of the economic situation in the country and in the world. This allowed the company to release reserves accumulated during the period of uncertainty caused by the pandemic, as well as in accordance with the merger activity with M&A.For the 3rd quarter of 2021, the company reported revenue of $ 29.66 billion. This indicator is 1% higher than the same one last year. The indicator of commissions for asset management in the amount of $ 5.2 billion increased by 18% compared to 2020, and by 1% compared to the last quarter.The company has concentrated the commission in the investment banking sector by $ 3.3 billion, which is by a hair's breadth higher than the one known for the 3rd quarter of 2020. However, this parameter showed a decrease of 5% compared to Q2 2021.Accordingly, the company's net profit increased by 24, compared to the same period in 2020, and amounted to $ 11.7 billion.What to do with assets?The tightening of monetary policy planned for next year will provide the company with a huge range of opportunities to increase its own interest rates, as well as the profitability of individual loans.Experts are quite optimistic about the prospects of the bank. It is expected that together with all companies operating in this sector of the economy, the issuer's situation will improve in the near future, as well as other companies. Regardless of the fact that the situation with coronavirus in the world remains unstable, problems with energy prices, supply disruptions, the country's GDP will grow, and in 2022 it will show a 6% jump.This fact stimulates further vaccination, which returns humanity and the economy to the pre-pandemic indicators of life and development. If we take the technical side of the picture, then the company's shares are growing in price. In just a couple of recent days, JPMorgan shares have been slowly but surely creeping up. Already now we can say that some of the losses have been leveled. Today, assets are still worth a fairly affordable price, since the price has not yet reached an annual maximum. From the current level, we can expect assets to grow to $ 190 per ...

Last year, during the pandemic, banks would have had to set aside billions of dollars to avoid potential loan losses. If it were not for the intervention of the US government and the Federal Reserve System, the situation would have been more complicated than it actually turned out.Among the lucky ones who survived 2020 was Citigroup, which managed to partially regain the trust of its investors by working on mistakes and shaking up its management team, which allowed the bank to adjust its course.The largest international corporation Citigroup Inc. was founded on April 7, 1998 as a result of the merger of Travelers Group and Citicorp. The banking group manages assets with a total value of more than $1.9 trillion. The number of employees worldwide is 350 thousand. It is a leading distributor of US Treasury bonds.Citigroup Inc. leads in two segments:In the Global Consumer Banking segment, the company is represented by the Citi brand and provides services in the financial and credit sector, such as investments, card servicing, etc.In the segment "Group of institutional clients"," wholesale trade " of services is carried out, such as servicing operations with securities, currency, banking consultations, brokerage services, etc. Citigroup's business activities cover 160 countries and jurisdictions. To do this, the bank had to comply with the rules of different countries and the Central Bank, as well as face various geopolitical risks. Therefore, the bank strives to simplify operations and correct deficiencies in the data control and risk management system.Now the bank wants to stop all operations in 13 countries where its divisions show weak results. In addition, according to the management of Citigroup, these markets lack long-term potential. The operations that were supposed to be sold or liquidated were able to pay off in 2020, but the indicators were still much lower than those of the rest of Citigroup's divisions serving clients in Asia, Latin and North America, which brought at least some profit.According to CFO Mark Mason, in 2020, loans in these 13 markets almost doubled in price. They also had to allocate significant capital. Thus, the bank allocates $7 billion to maintain total assets of $82 billion.Golden MistakesCitigroup has a huge operating volume. Private clients are served through the consumer banking segment, and institutional clients are served through the investment banking segment. The latter's revenue indicator in total revenue is 63%. In this segment, the bank is engaged in treasury and trading solutions, services for private banking and the financial market.At the end of 2020, the regulatory authorities fined the bank $400 million for risk management practices and non-compliance with regulatory requirements. The reason for the imposition of the fine was "long-standing shortcomings", including the attitude to customers on insurance and foreclosure issues.During the same period, several smaller fines were imposed on Citi. The company received one of them due to violations in the financial markets.In addition to the fines, the bank was the victim of a major error in the amount of $893 million, which consisted in an erroneous transfer of funds to several creditors, as a result of which one of them refused to return the amount received. Citi was a loan specialist of the cosmetics company Revlon and had to pay a paltry amount of interest in the amount of $7.8 million on behalf of the cosmetics giant. Now Citi cannot pay about $504 million, which the judge declared hopeless.But a more serious problem, quite possibly, was the lag in the share price, which kept the company's shares below the book value level throughout 2020. At the same time, the shares of competitors rose from even higher levels of the basic valuation. Investor confidence has been undermined by constant regulatory shocks.Amid all these problems, the then CEO Michael Corbat announced his retirement and the replacement of the leader with the highly professional Jane Fraser.What can save the bankEmerging from lagging markets that are draining its finances, Citigroup will be able to refocus its presence in the consumer banking segment in Asia, Europe, the Middle East and Africa, focusing on four centers of financial abundance — Singapore, Hong Kong, the United Arab Emirates and London. The new structure of the bank will include two main branches: in the USA and Mexico, as well as four hubs (about them above), which will serve 100 million customers.These important centers will allow the bank to grow significantly and provide attractive returns from its proposed asset management business, Fraser said.As head of Citigroup, Fraser saw the growth potential of the asset management business, especially in the Asian market. Some time ago, the company announced its intention to turn client capital management and private banking into a single unit for institutional clients, which will simplify the analysis for investors. Most likely, the business with wealth brings Citigroup more than consumer privileges in the 13 markets from which the bank is seeking to leave.In 2020, Citigroup's asset management business turned out to be quite successful, allowing an increase in assets under management by 26% by the end of the first quarter of 2021 compared to the same period last year. This figure amounted to $222 billion.This operating volume is less than that of competitors, for example, Bank of America manages assets worth $1.5 trillion. Another competitor, JPMorgan Chase, manages $2.8 trillion in assets. But Citigroup is confident that we can expect significant progress with the support of Asia and other international markets.In the next quarter, Citigroup will focus not on dividends, but on share repurchases, which, according to Jane Fraser, look especially attractive now that the shares are below their fair book value. This makes sense, given Citigroup's low rating. Fraser also noted that the quarterly dividend will be higher than $0.51 per share (this is the current level).At the same time, Citigroup's quarterly dividend yield is not bad – 2.9%. The annual payout per share is $2.04 with a low payout ratio of 32%.Although Citigroup is lagging behind its competitors this year, the figures for the first quarter look good. Thus, net profit increased to $7.9 billion, a year earlier this figure was $2.5 billion, and in the 4th quarter – $4.3 billion. Corporate lending services, trading solutions, investment programs and the treasury brought the greatest profit. The growth of stocks since the beginning of the year was about 15%.Now we can talk about a transition period for Citigroup. Having taken over the company in March, Fraser began to transform several areas at once. We are talking about improving internal control and exiting emerging markets. His focus was on major international wealth centers, as well as on the money management business. The results of the transformation will be visible in a few quarters. But it seems that the bank is on the right track, and given the economic recovery, the next two years will be profitable for Citigroup.In our opinion, now there is a good opportunity to buy this stock, the adjustment of which was completed just a couple of days ago. Sellers lowered the asset to $65.80, where the initiative passed to the bulls. In just two days, they raised the market to $68.45 and are unlikely to stop there.We recommend buying these shares for a long time, as they will grow for more than a year. The nearest targets for purchases are $72, $80 and ...

After a lot of profit and loss reports, which American bank is the best to invest in? Let's take a look.Choosing the best American bank for investment can be a difficult task. It is necessary to carefully study their balance sheet, to find the organizations with the highest costs and the largest obligations. Sometimes such expenses can be an unavoidable evil. With the growing number of online-only competitor banks seeking to capture market share by appealing to millennials, well-known brands will inevitably seek to actively invest in improving their infrastructure.Currently, there is an opinion that investors are spoiled for choice, if we talk about the best stocks of American banks. After a year complicated by the coronavirus pandemic, the four largest consumer-oriented brands showed steady results in the second quarter of 2021.The Big FourWells Fargo's net profit for the three months to June 30 was $6.04 billion, which is in sharp contrast to a net loss of $3.8 billion for the same period in 2020. However, the bank warned that "low interest rates and moderate demand for loans" are still a concern.Bank of America expressed similar concerns when it presented its latest earnings report. Net profit of $9.2 billion was increased due to the release of $1.6 billion previously held in reserve in case of default of borrowers on their loans. But interest income fell by 6%, partly due to the persistently low base rate set by the US Federal Reserve.Other contenders for the title of the best shares include Citigroup, which also made a profit of $1.1 billion after releasing some of the cash. The bank's CEO Jane Fraser, saying that consumer and corporate confidence is growing, said: "This was observed in all our companies, which was reflected in the indicators of investment banking and stocks, as well as in a noticeable increase in expenses on our credit cards. Although we should be aware of the uneven recovery on a global scale, we are optimistic about the future."And another bank, no less important than the previous ones. This is JPMorgan Chase, whose quarterly net profit was $12 billion. Again, a large role was played here by the issuance of credit reserves in the amount of $3 billion. The bank's chairman and chief executive officer, Jamie Dimon, said that total credit card expenses increased by 45% this quarter and were 22% higher than before the pandemic in the second quarter of 2019. It is not surprising that the main drivers of growth were spending on travel and entertainment.If we put together the results of all four major American banks, the overall picture shows that they collectively received $33 billion in profit, 9 billion of which can be associated with the release of reserve funds. This is $9 billion more than analysts expected.Although the US inflation rate is rising, the mood in Washington suggests that banks will have to contend with near-zero interest rates for some time yet. Federal Reserve Chairman Jerome Powell told a Congressional committee that the central bank does not plan to raise the base rate earlier than 2023. This may become an undesirable obstacle to the profitability of the US banking sector, even if the demand for loans increases.Read more: Causes of inflation and scientific approaches to their studyThe Best Shares of American Banks in 2021Even as net income recovers, data from the Financial Times shows that costs are also rising significantly, as the shares of the largest US banks are trying to fend off the threat from smaller (and possibly more flexible) competitors in the financial technology sector. The total expenses of the "big four" for the last quarter amounted to $6.6 billion, an increase of 10% compared to the same period last year.Technology and marketing are mainly behind this growth. Given how the use of cash has decreased due to the coronavirus pandemic, some banks are now trying to catch up by introducing digital services. In the US, Internet-only companies, including Current, Varo and Chime, sought to attract customers by processing their payments faster, offering elegant smartphone applications and refusing transaction fees and minimal balance balances.In particular, it seems that the monetary assistance to American households has taught the traditional banking sector a lesson: consumers expect speed and will vote with their feet if they do not receive their funds quickly enough. Indeed, a study by Cornerstone Advisors suggests that in the US in December 2020, 15% of millennials had digital bank accounts, compared with 5% at the beginning of the same year.However, JPMorgan, Wells Fargo and Citigroup closed more than 250 branches in the first half of 2021, and more closures are expected. This is due to the confidence that those customers who started using online banking during the blocking will not return to the branches in the near future. It could also free up capital to expand digital offerings, which are quickly becoming the main focus for people opening accounts and applying for loans.Frequently Asked Questions1. Why are bank shares falling?Stocks of the best American banks can sometimes serve as a barometer of the state of the economy and can fall when Wall Street is nervous about the danger of an economic recovery. Despite the steady numbers on macroeconomic indicators in the second quarter, shares of companies such as Citigroup fell due to continuing concerns about interest rates.2. Are bank stocks a good investment?According to CNN Business, currently, the consensus among investment analysts is that it is worth buying shares of Wells Fargo, Bank of America, JPMorgan Chase, and Citigroup. As for the projected growth in stock prices, the average forecast for Citigroup is the most attractive, as it is expected that they will grow by 26.3% in the next 12 months.3. How do bank stocks perform during inflation?Thomas Michaud, CEO and president of the investment bank Keefe, Bruyette&Woods (KBW), recently stated that, in his opinion, "bank stocks are a good place if concerns about inflation continue to ...