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Morgan Stanley: Financial Winner

NEW YORK ( TheStreet) -- Morgan Stanley (MS - Get Report) was the winner among the largest U.S. financial names on a mixed Monday for the sector, with shares rising over 1% to close at $14.25.

The broad indexes all saw slight declines, after the U.S. Census Bureau reported that its advance estimates for U.S. retail and food services sales showed a seasonally adjusted decline of 0.5% during June from the previous month, although sales were up 3.8% from a year earlier. Total sales for the second quarter were up 4.7% the second quarter of 2011.

The KBW Bank Index (I:BKX) was down slightly to close at 45.85, with 11 of the 24 index components rising for the session.

Citigroup (C - Get Report) reported second-quarter earnings of $3.1 billion, or a dollar a share -- excluding one-time positive debit valuation adjustments (DVA) and credit valuation adjustments (CVA), and the company's $274 million after-tax loss on the sale of its stake in Akbank -- beating the consensus estimate of an 89-cent profit, among analysts polled by Thomson Reuters.

In comparison, Citi's adjusted operating earnings were $3.4 billion in the first quarter, and $3.1 billion in the second quarter of 2011.

During the second quarter, the bottom line was boosted by a $984 million, compared to reserve releases of $1.2 billion the previous quarter, and $2.0 billion a year earlier.

Citigroup's second-quarter revenue totaled $18.6 billion, missing analysts' consensus $18.8 billion estimate, but on adjusted basis to exclude the DVA, CVA and the Akbank loss, total second-quarter revenue came in at $18.8 billion, declining from adjusted total revenue of $20.2 billion the previous quarter, and $20.3 billion a year earlier. The year-over-year revenue decline mainly reflected lower revenue from Citi Holdings, which holds Citigroup's run-off assets, as part of Citigroup CEO Vikram Pandit's "good bank/bad bank" strategy to right-size the company's balance sheet. The sequential revenue decline mainly reflected lower securities and banking revenue outside North America.

The company also reported that its estimate Basel III Tier 1 capital ratio increased to 7.9% as of June 30, from 7.2% at the end of March.

Citigroup's shares rose 1% to close at $26.81. The shares have now returned 2% year-to-date, following a 44% decline during 2011. C Chart C data by YCharts

The shares trade for just over half their reported June 30 tangible book value of $51.81, and for less than six times the consensus 2013 earnings estimate of $4.54. The consensus 2012 EPS estimate is $3.91.

Nomura analyst Glenn Schorr rates Citigroup a "Buy," with a $41 price target, and said after the earnings announcement that the results were "not bad considering the environment," as core revenues at main subsidiary Citicorp "hung in," while "expenses were in check," Capital Markets were "OK," and "core loans and deposits grew (Citicorp loans +10% y/y)."

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