Citigroup: Financial Winner (Update 1)

Updated with Citigroup's announcement about its revised capital plan and trust preferred share redemptions.

NEW YORK (TheStreet) -- Citigroup (C) was the winner among the largest U.S. financial names on Friday, with shares rising over 3% to close at $27.76.

The broad indexes all saw 1% gains, after President Obama said that heading into Greece's coming elections, "it is in everybody's interest for Greece to remain in the eurozone while respecting its commitments to reform," and that the sooner European leaders act "carry out necessary fiscal reforms" and "promote economic growth and job creation," the "sooner people and markets will regain some confidence and the cheaper the costs of cleanup will be down the road."

Banks led the market, with the KBW Bank Index (I:BKX) rising 2% to close at 43.61, with all 24 index components seeing gains for the session, except for Bank of New York Mellon (BKX), which was flat for the day, closing at $20.50.

Citigroup's shares have now risen 1% year-to-date, after falling 44% during 2011.

The shares trade for 0.6 times their reported March 31 tangible book value of $50.90, and six times the consensus 2013 earnings estimate of $4.62, among analysts polled by Thomson Reuters. The consensus 2012 EPS estimate is $4.11.

Raymond James analyst Anthony Polini on Wednesday lowered his rating for Citigroup to "Outperform" from "Strong Buy," while cutting his 12-month price target for the shares to $35 from $48, and lowering his 2012 earnings estimate to $4.08 from $4.20, and his 2013 EPS estimate to $4.42 from $4.88.

Polini said that "persistent global economic concerns could negatively impact C's relative price performance over the near term," and that his new price target assumed the company would trade "at about 8.0x 2013E EPS of $4.42 or at a discount to our industry average (comprised of the nation's 40 largest banks) of 10.4x," with the discount "warranted given the weak domestic economic recovery and the company's relatively high international exposure."

Citigroup announced on Friday that it would redeem two trust preferred issues on July 18, including the Citigroup Capital XII fixed/floating rate trust preferred shares, with a coupon of 8.50%, and the Citigroup Capital XXI trust preferred shares, with a coupon of 8.30%

Citigroup said that the Federal Reserve's proposed capital rules will exclude trust-preferred shares issued before May 19, 2010 from Tier 1 capital, which qualifies as a "regulatory capital event" as defined under the terms of the trust preferred issues, meaning the company can redeem the shares at par.

The company said that "as a result of these redemptions, Citigroup's Tier 1 Capital is expected to decrease by approximately $4.9 billion and its Tier 1 Capital ratio is expected to decrease by approximately 50 basis points," but that its Tier 1 common capital ratio would be unaffected under the current Basel I rules, and also under Basel III.

Interested in more on Citigroup? See TheStreet Ratings' report card for this stock.

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-- Written by Philip van Doorn in Jupiter, Fla.

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Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.