Financial stock to watch: Citigroup Inc (NYSE: C)

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Citigroup Inc (NYSE: C) stock rose 2.1% on 15th October, 2019 (As of 12:43 pm GMT-4; Source: Google finance) after the company posted better than expected results for the third quarter of FY 19 as growth in its consumer banking business offset the weakness in trading. Net income applicable to the bank increased 6% to $4.9 billion in the third quarter from $4.6 billion, a year earlier. C by assets hit a return on tangible common equity (ROTCE) of 12.2%, which is above the goal of 12% it has promised investors for the year. Citigroup’s book value per share of $81.02 and tangible book value per share of $69.03, both as of quarter end, increased 11% and 12%, respectively, compared to the prior year, due to higher net income and reduced share count.

C in the third quarter of FY 19 has reported the adjusted earnings per share of $1.97, beating the analysts’ estimates for the adjusted earnings per share of $1.95, according to IBES data from Refinitiv. The company had reported the adjusted revenue growth of 1 percent to $18.57 billion in the third quarter of FY 19, beating the analysts’ estimates for revenue of $18.5 billion. Trading revenue of the bank declined by 1% as a decline in equities offset stable revenue in fixed-income trading. The revenue in its consumer unit grew 4% excluding the impact of currency fluctuations, outpacing its institutional clients business where revenue grew 3%.

Meanwhile, Citi intends to set up a wholly-owned securities business in China, people with knowledge of the matter said in order to take the advantage of Beijing’s move to fully open up some of its financial sectors to foreigners next year. The company is in the process of completing its exit from a minority-owned securities joint venture in China, which is a process that is anticipated to be completed by end of this year. Global investment banks are currently able to own up to 51% of their China operations, which means that needs a joint venture with local Chinese partners. The limits on foreign ownership of securities firms will be removed on Dec. 1, 2020. The China Securities Regulatory Commission will start taking in applications in the second quarter of 2020, and intends to give some of the licences for wholly-owned securities business by end of the year. If things work out as per the plan, Citi will become one of the first foreign banks to set up a wholly-owned securities business in China.

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