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How Will Citigroup (C) Stock Be Affected By SEC Settlement?

NEW YORK (TheStreet) -- Shares of Citigroup Inc. (C - Get Report) are down -1.10% to $47.81 after U.S. District Judge Jed Rakoff today reluctantly approved a $285 million fraud settlement between the bank and the SEC, two months after an appeals court voided his decision to reject it as inadequate, Reuters reports.

The judge said he had little choice but to approve the deal, which did not require the bank to admit to any wrongdoing. But he said he feared the 2nd U.S. Circuit Court of Appeals' decision would rob such settlements of any "meaningful oversight," Reuters said.

The SEC's complaint was over a 2007 sale of mortgage-linked securities debt that resulted in over $700 million of investor losses.

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TheStreet Ratings team rates CITIGROUP INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate CITIGROUP INC (C) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. Among the primary strengths of the company is its reasonable valuation levels, considering its current price compared to earnings, book value and other measures. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 8.2%. Since the same quarter one year prior, revenues slightly dropped by 6.8%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • CITIGROUP INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, CITIGROUP INC increased its bottom line by earning $4.25 versus $2.46 in the prior year. For the next year, the market is expecting a contraction of 16.5% in earnings ($3.55 versus $4.25).
  • The share price of CITIGROUP INC has not done very well: it is down 6.20% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it is one of the factors that makes this stock an attractive investment.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Commercial Banks industry. The net income has significantly decreased by 95.7% when compared to the same quarter one year ago, falling from $4,182.00 million to $181.00 million.
  • You can view the full analysis from the report here: C Ratings Report

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