Citigroup Climbs as Staite Boosts Estimates on Retail-Card Unit

October 24, 2011, 4:07 PM EDT

By James Sterngold

Oct. 24 (Bloomberg) — Citigroup Inc., the third-biggest U.S. credit-card lender, climbed as much as 5.1 percent as the bank’s decision to retain its retail-partner card portfolio prompted Atlantic Equities to boost earnings estimates.

“This is a highly profitable business,” Richard Staite, an analyst at London-based Atlantic Equities LLP, said today in a note to clients. “Strategically we would prefer a sale, but from an earnings perspective it makes sense to retain it.”

Citigroup, led by Chief Executive Officer Vikram Pandit, 54, said last week that it would shift the retail-partner unit and “a vast majority of its assets” out of Citi Holdings, a division Pandit created in January 2009 to hold and sell the bank’s unwanted businesses.

The retail-partner unit, which issues store-branded credit- cards for merchants including Home Depot Inc. and Exxon Mobil Corp., posted a $2.2 billion pretax profit through the first nine months of the year, New York-based Citigroup said in an Oct. 17 statement.

“This division, which has $44 billion of assets, is one of Citigroup’s more profitable businesses,” Staite said.

Citigroup climbed $1.04, or 3.4 percent, to $31.34 at 2:35 p.m. in New York and earlier touched $31.85. The shares had dropped 36 percent this year through Oct. 21.

Staite, who maintained an “overweight” rating on Citigroup, increased his 2012 and 2013 estimates for earnings per share by 3 percent to $4.72 and $5.57, respectively.

His opinion on Citigroup’s decision to keep the retail- partner unit contrasts with that of Moody’s Investors Service, which said it hurts the bank’s credit quality.

‘Higher Default Propensity’

“It will expose Citigroup to card customers with a higher default propensity,” Sean Jones, a Moody’s analyst, said today in a report. “A troubled card holder will choose to default on their limited-use retail-branded card over their more functional general-purpose credit card.”

The portfolio was a “source of sizable losses” for Citigroup, with write-offs peaking at 13.7 percent in the first quarter of 2010, Jones wrote. The third-quarter loss rate fell to 7.5 percent, he wrote.

The retail-partner unit also issues credit cards for companies including Sears Holdings Corp., Zale Corp., RadioShack Corp., Royal Dutch Shell Plc, Office Depot Inc. and Staples Inc., Elizabeth Fogarty, a Citigroup spokeswoman, said in an e- mail.

Credit-card lenders led financial stocks higher today as McLean, Virginia-based Capital One Financial Corp. advanced 5.2 percent, the best performance in the 24-company KBW Bank Index. Discover Financial Services, based in Riverwoods, Illinois, climbed 5 percent.

-With assistance from Donal Griffin in New York. Editors: Peter Eichenbaum, William Ahearn

To contact the reporter on this story: James Sterngold in New York at jsterngo[email protected]

To contact the editor responsible for this story: David Scheer at [email protected]

Article source:


Leave a Reply

Other News


    SOUTH AFRICA: Deportation of Zimbabweans tearing families apart

    PRINT EMAIL FEEDBACK SHARE HARARE, 25 October 2011 (IRIN) - Doreen Sibanda, 27, was among the first undocumented Zimbabwean nationals to be deported in early October 2011 after South Africa apparently lifted its more than two year moratorium on expulsions imposed following widespread xenophobic violence in 2008. “I was on my way to the shops to buy porridge for my four-year-old son when I was stopped by the police [in the inner city Johannesburg suburb of Berea] who asked for [...]

    Read more →

    Zimbabwe’s mega mining project in limbo

    The revival of Zimbabwe’s biggest iron and steel company by an Indian company Essar is now in limbo because of squabbles in President Robert Mugabe’s unity government. Essar a few months ago struck a US$3.5-billion deal with the Zimbabwean government to take over Ziscosteel in what was described as the southern African country’s largest direct foreign investment in a decade. But the new company now trading as NewZimsteel’s future is already in doubt following conflicting statements from government ministers on [...]

    Read more →

    Zimbabwean PM opens self to criticism over gay rights

    By Tichaona Chifamba HARARE, Oct. 25 (Xinhua) — Prime Minister Morgan Tsvangirai has opened himself up for a barrage of attacks from President Robert Mugabe, his party Zanu-PF and conservative Zimbabweans who do not subscribe to gay rights. Tsvangirai, who in March 2010 agreed with Mugabe that homosexuality should not be allowed in Zimbabwe, sometimes appears overwhelmed by occasions and this week told BBC that he would support a constitution which protected the rights of such people. His spokesman Luke [...]

    Read more →

    Zimbabwe: 2005 Mass Protests Sought to Divert Attention From MDC Split, Says …

    By SPECIAL CORRESPONDENT Published: October 25, 2011 Share Published by the government of Zimbabwe 25 October 2011 MDC-T leader Mr Morgan Tsvangirai has admitted the party’s 2005 split made him irrelevant as a potential candidate to lead Zimbabwe. He said in his recently published book “Morgan Tsvangirai: At the Deep End” that the split dented his standing as a political leader. “My relevance and legitimacy as a potential president of Zimbabwe was severely put to the test as people wondered [...]

    Read more →

    Zimbabwe: Channel O Music Video Awards to Be Beamed Live

    Published by the government of Zimbabwe 25 October 2011 opinion Garikai Mazara, the entertainment editor of The Sunday Mail and yours truly have a lot in common although he is my senior. I have known him for eight years now and we have been through a lot together. In fact, Garikai whom I often refer to as “Uncle” was always there for me especially during my formative days as a cub reporter. To a certain extent, Garikai is what Robson [...]

    Read more →

    Zimbabwe: Passport Fees Remain Unchanged - Registrar-General

    Published by the government of Zimbabwe 25 October 2011 THE Registrar-General’s Office will not reduce passport fees until Treasury commits itself to fund the department like other countries in the region, Parliamentarians were told yesterday. An ordinary Zimbabwean passport costs US$50 while in other Sadc countries they are going for less than US$30. Speaking during a tour of the RG’s Offices by members of the Portfolio Committee on Home Affairs and Defence yesterday, RG Mr Tobaiwa Mudede, acknowledged Zimbabwean passport [...]

    Read more →

    Zimbabwe: Butcher to Chop and Change

    By SPECIAL CORRESPONDENT Published: October 25, 2011 Share Published by the government of Zimbabwe Paul Munyuki 25 October 2011 Bulawayo — ZIMBABWE cricket coach Alan Butcher yesterday hinted that there could be some big changes for the national side in today’s clash against New Zealand in the third and final ODI at Queens Sports Club. The Englishman indicated that Njabulo Ncube and Natsai Mushangwe have a good chance of making their first appearance in the red strip while Prosper Utseya [...]

    Read more →

    Zimbabwe: Cricket – Tough Time Ahead

    Published by the government of Zimbabwe Dean du Plessis 25 October 2011 It’s not so much about the fact that Zimbabwe have lost the One-Day International series to New Zealand but it’s the manner, in which the home side have lost, which has raised concern. The poor bowling and appalling fielding has taken the gloss off a wonderful performance by captain Brendan Taylor who became the first Zimbabwean to score back-to-back centuries in ODIs. What Taylor has done very well [...]

    Read more →