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The lawyers and hedge funders are out at Citigroup (C), and bankers are in charge for the first...

The lawyers and hedge funders are out at Citigroup (C), and bankers are in charge for the first time since John Reed retired in 2000, writes Sandra Ward in a bullish Barron's piece. Distinguishing Citi from its peers is 58% of revenue coming internationally vs. JPM and BAC in the teens - a big edge with U.S. growth crimped by regulations and the economy. In the nearer term, shareholders should enjoy massive capital returns as toxic paper at Citi Holdings is wound down (CH has 8% of bank assets, but ties up 20% of capital), and growing profits allow the use of Citi's $55B in tax deferred assets.
Comments (15)
  • Well, still discussing toxic paper. It is all toxic paper. What happen when interest rates move higher in Europe. That paper will eat into the 20% capital you labeled. Who is going to purchase this paper. What fool will do that. Well, I answered my own question, BAC, JPM, to name a few. What happen when the taxes are due. Another hit. Wake up, they S***, bankers are not much smarter than hedge fund managers and especially lawyers in finance. It will crash soon
    13 Jul 2013, 09:17 AM Reply Like
  • Bank bond positions if properly hedged will not cause undo harm to their balance sheets. Even your comment is non-toxic. Interest rates have edged down at the end of this past week. Its all on the upside from here. Banks stocks should continue to rally. Now is not the time to bet they will fall.
    13 Jul 2013, 09:57 AM Reply Like
  • Citi has also been unloading much of its MBS to PennyMac, run by former Countrywide and B of A executives.

     

    It will be interesting watching how this all unfolds.

     

    http://bit.ly/15Da05p

     

    "There are professionals in the mortgage and real estate markets who do not realize that the delinquency rate of prime jumbo mortgages is now over 18% and climbing? The loss severities on the MBS which are not guaranteed by Fannie or Freddie are now running 60-95%. Moody’s recently did a review of over 8,000 of these non-Agency residential MBS and found over 300 which they believed would be total losses in a high-stress scenario."
    13 Jul 2013, 10:09 AM Reply Like
  • But shouldn't the mortgage biz which was good for the geese (JPM, WFC) also be good for the gander, i.e. Citi. On top of all this, I hear some anecdotal evidence that NY property market (both commercial and residential) is red hot....
    13 Jul 2013, 05:04 PM Reply Like
  • I feel sorry for you of you really believe that the current market situation is supported by the item you reference. The market right now is more solid, and the default rate is currently no where close to what you believe. The banks are all profitable. The mortgage REITS are on weak ground because of their use of leverage and with short term rates getting hit recently are getting into trouble. These funds like AGNC and NLY have tanked. I was commenting on this over 6 months ago and sold all my positions in these type investments. If I am so stupid and wrong, how come I'm so rich making millions off this market and you lost your home?
    14 Jul 2013, 03:58 PM Reply Like
  • David. Why so convinced?
    14 Jul 2013, 11:43 PM Reply Like
  • Right and square on the nose hitting on this one. Look for further rise. IF BAC breaks above 14 - another dollar higher can be in the cards. "Looking good Valentine - feeling good Lewis." - Trading Places.
    16 Jul 2013, 09:24 AM Reply Like
  • Ouch...that was rather vicious. Making money has little or nothing to do with ethics now-a-days.

     

    I have never commented that you are so stupid or wrong, my comments have been directed at making money based on fraudulent activity and theft of the American public and to be clear...I am not saying that YOU are doing that. I do not know you personally, nor do I know anything about your lifestyle or ethics. I do not begrudge anyone making a good living from good old fashioned hard work, diligence, and intelligence. However, using a position of authority or trust in order to cheat others is just plain wrong.

     

    From an article by Adam Taggart quoting William Black: http://bit.ly/17nP5mj

     

    "In the U.S., our regulators have publicly embraced a “too big to prosecute” doctrine. We are restraining, underfunding, and dismantling regulatory oversight in the interest of short-term stability for the status quo. Which, as a criminologist, Black knows with certainty creates an environment where bad actors will act in their self-interest with assumed (and likely real, at this point) impunity.

     

    If you can steal with impunity, as soon as you devastate regulation, you devastate the ability to prosecute. And as soon as that happens, in our jargon, in criminology, you make it a criminogenic environment. It just means an environment where the incentives are so perverse that they are going to produce widespread crime. In this context, it is going to be widespread accounting control fraud. And we see how few ethical restraints remain in the most elite banks."

     

    Quoted from a letter by a respected attorney to the American Bar Federation:

     

    "ONGOING DEFIANCE---BANKS REFUSE TO COMPLY WITH THEIR OWN CONSENT ORDERS
    And shockingly, numerous banks after being successfully sued and having the lawsuits settled (even with Consent Orders entered into with the few aggressive prosecutorial government agencies), ...ARE NOT complying with the terms of the Consent Orders! Their open defiance to the legal system, including towards the judiciary by defying the Orders, continues on, unchecked.

     

    For your enlightenment on this crisis, just focus on one mortgage foreclosure case, and study the multitude of laws that are flagrantly and openly being violated by the banks and the mortgage bankers. Contrary to the erroneous public opinion, these homeowners are NOT deadbeats. They are victims of pure fraud."

     

    With the current climate of volatility in the MBS markets, I would think that a certain amount of caution would be warranted. That is all.
    18 Jul 2013, 11:38 AM Reply Like
  • An increase in div. coming together with $10 price appr by end Nov. Accumulate while cheap ! Start adding JPM to basket. Long BDBD -go research it !
    13 Jul 2013, 09:24 AM Reply Like
  • I'm not convinced all Citi's foreign exposure is a good thing. I'm sticking with BAC. Commercial banks do not generally buy bonds -- seven or more years in maturity -- for investment purposes. Bills and notes only. I keep seeing/reading this bond-loss crap on TV and in the papers, despite Jamie Dimon explaining to CNBC. Rates going up is what banks want, 100%.
    13 Jul 2013, 10:21 AM Reply Like
  • Why do banks want rates to increase?
    13 Jul 2013, 01:52 PM Reply Like
  • "Why do banks want rates to increase?"

     

    Interest rate spread is how banks make money on loans. They borrow short and lend long and earn the difference between rates. So they want long term rates to rise yet want short-term rates to stay low.
    14 Jul 2013, 12:28 AM Reply Like
  • Anyone who acts on the information or disinformation in this poorly written incoherent piece may be in for a rude surprise one way or another. The Barron's writer should go back to school and re-enrole in English 1A ("Dumb Bell English," it was called at my school).
    13 Jul 2013, 02:02 PM Reply Like
  • interest speads should increase for the banks as rates rise. That then will be the driver for bank profits.
    14 Jul 2013, 11:10 AM Reply Like
  • I hope Citi brings down net outstanding shares by 30% - 40% over the next 5 years.
    15 Jul 2013, 08:47 AM Reply Like
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