CHICAGO, June 12, 2012 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Citigroup Inc. (NYSE: C),Bank of America Corp. (NYSE: BAC), MetLife Inc. (NYSE: MET), SunTrust Banks Inc. (NYSE: STI) and Wells Fargo & Co. (NYSE: WFC).
Get the most recent insight from Zacks Equity Research with the free Profit from the Pros newsletter: http://at.zacks.com/?id=5513
Here are highlights from Monday's Analyst Blog:
No Hike in Citi 2012 Capital Payout
Citigroup Inc. (NYSE: C) has finally decided against any hike in its shareholders payout in 2012. The company, which could not pass the stress test in March with its proposed plan to return capital to shareholders, and has now decided to readdress the issue "later this year." Instead of boosting its capital payouts, the company intends to build its capital level and continue with its efforts to trim its non-core assets.
The Story Behind
It was back in 2009 when Citi's dividend was scrapped following the financial crisis. The company was saved from near collapse through a number of bailouts. Over the course of time, Citi repaid these and reinstated a 1 cent per share quarterly dividend in 2011. It was hoping to boost its shareholders payout this year and submitted its capital plan accordingly for the 2012 stress test.
Unfortunately, the stress on a company's capital position under a hypothetical situation of difficulty, found that with its projected payouts, Citi's capital ratios fell short of the regulatory requirements. The company, however, satisfied the stress test requirements without a capital deployment plan.
At that time, the Fed had allowed Citi to continue with its existing dividend levels on its preferred and common stocks and had no objection to the company redeeming a certain series of outstanding trust preferred securities.
In fact, Citi's situation this year was quite similar to that of Bank of America Corp. (NYSE: BAC) last year. BofA's plan to return capital to shareholders was rejected last year by the Fed, but it passed the stress test this year without its request to increase capital redeployment to shareholders this year.
In order to adhere to the financial reform law, Citi will redeem two series of trust preferred securities which will lead to a decrease in its Tier 1 Capital of around $4.9 billion and its Tier 1 Capital ratio is likely to bear a negative impact of around 50 basis points. These redemptions would have no impact on Citi's Tier 1 Common capital and related Tier 1 Common ratio, under Basel I and as estimated under Basel III.
Notably, according to the Dodd-Frank Act, from 2013, banks will no longer be able to include these securities as regulatory capital.
Citi has failed to significantly enhance shareholder value following the financial crisis, and this somewhat weakened its competitive position. Unlike Citi, the other Wall Street big players such as Wells Fargo & Co. (NYSE: WFC) passed the stress test well and declared increases in dividends and share repurchases.
In fact, prior to the declaration of the stress test results this year, investors were widely speculating about the extent of capital payout that Citi would go for. Their speculations suffered a blow when Citi failed the stress test.
We believe that it is a wise decision on part of Citi to strengthen its capital levels first and then ask for such payouts. That would serve as a long-term catalyst for the stock. TruPS redemption is also a strategic move to abide by the financial reform norms.
Going forward, we believe that investments and efficiency savings would help in garnering solid market share. Improved credit trends are encouraging. Expense outlook is also impressive.
In fact, one can consider a company like Citigroup as a value investment given its global footprint and attractive core business. A low interest environment, low liquidity and a tough regulatory environment remain our concerns.
Citi shares currently retain the Zacks #3 Rank, which translates to a short-term Hold rating. Considering the fundamentals, we also maintain 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=5515.
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=5517
Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Leon Zacks. As a PhD from MIT 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=5518.
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/home.php#/pages/Zacks-Investment-Research/57553657748?ref=ts
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.
SOURCE Zacks Investment Research, Inc.