AIG: Financial Winners and Losers

American International Group was among the biggest decliners in the financial sector Monday following a weekend article by Barron's that argued the insurer's stock is overpriced.
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(

Updated with final stock price movements throughout, Citi credit card portfolio sales and details of Morgan Stanley downgrade

.)

NEW YORK (

TheStreet

) --

American International Group's

(AIG) - Get Report

was among the biggest decliners in the financial sector Monday following a weekend article by

Barron's

that argued the insurer's stock is overpriced.

In the piece,

Barron's

asserts that

AIG's

$58 billion worth of equity drops to roughly $15 billion once the U.S. government's more than $42 billion preferred equity stake is taken into account.

Additionally,

Barron's

said AIG shareholders will suffer further dilution as the company gives the government $25 billion in fresh equity to pay down part of its $44.8 billion in obligations to the

Federal Reserve

.

Barron's

concludes that AIG has negative tangible common shareholder equity of $7 per share at the end of the second quarter, according to the report.

Separately,

The Wall Street Journal

reports that Steven Udvar-Hazy, chairman and chief executive of AIG's International Lease Finance Corp. aircraft leasing business, is in early discussions to purchase about $2 billion of the company's aircraft portfolio and use it to start a rival business, citing people familiar with the matter.

ILFC has been on the block for almost a year, the

Journal

notes, adding that the business is saddled with more than $30 billion in debt.

AIG shares shed $4.90, or 9.8%, to close at $45.33 Monday. Still, the stock has surged 245% over the last month.

Other high-beta financial names that have rocketed higher much like AIG were on the decline Monday.

Fannie Mae

slid 5.4% to $1.93, and

Freddie Mac

fell 4.6% to close at $2.29.

FBR Research Monday said that "no underlying value remains" in Fannie and Freddie, the so-called "

zombie stocks

." Combined with huge exposure to nonperforming loans and the "large question mark" about the future structure of the agencies, FBR analysts see the shares as simply a short-term speculative profit bet.

Bank stocks were mixed Monday following a research note Sunday from Rochdale Securities analyst Richard Bove, who wrote that bank earnings will be dismal for the remainder of this year, although they are "likely to spike 300% to 500% in 2011 to 2015."

Bove said a review of second quarter results, based on numbers from the Federal Deposit Insurance Corp., reveals an industry with solid liquidity and capital, and an enhanced competitive position.

"It also reveals an industry with severe problems," Bove added. "The problems will prevent industry earnings from rising for 12 months. The liquidity and capital will be the base for significant earnings improvement from 2011 to 2015."

Bove advised long-term investors to keep their positions "because they are likely to be rewarded. Nearer term investors might consider the fact that a reaction to the recent move up in the stocks may develop," he said.

Bank of America

(BAC) - Get Report

was lower by 2.2% to $17.59. On the other hand,

JPMorgan Chase

(JPM) - Get Report

ended higher by 1.3% to $43.46 and

Wells Fargo

(WFC) - Get Report

tacked on 0.8% to $27.52.

Citigroup

(C) - Get Report

lost 4.4% to finish at $5 after the bank announced that it had sold the ownership of three North American partner credit card portfolios, which represented approximately $1.3 billion in managed assets. The card portfolios were a part of Citi Holdings, the company's so-called bad bank division, as opposed to continuing profitable operations under Citicorp.

In other bank news,

The New York Times

reported that the

U.S. government has collected profits

of about $4 billion from eight of the biggest banks that have fully repaid their obligations from the federal rescue of the banking system last year.

The government has taken profits of about $1.4 billion on its investment in

Goldman Sachs

(GS) - Get Report

, $1.3 billion on

Morgan Stanley

(MS) - Get Report

and $414 million on

American Express

(AXP) - Get Report

.

Northern Trust

(NTRS) - Get Report

,

Bank of New York Mellon

(BK) - Get Report

,

State Street

(STT) - Get Report

,

U.S. Bancorp

(USB) - Get Report

and

BB&T

(BBT) - Get Report

each brought in $100 million to $334 million in profit, the

Times

notes.

Morgan Stanley

shares lost ground Monday after Bank of America-Merrill Lynch analyst Guy Moszkowski cut his rating on the stock to neutral from buy, arguing compensation costs put a cap on near-term earnings potential. Morgan Stanley shares lost 55 cents, or 1.9%, to close at $28.96.

Elsewhere,

Hudson City Bancorp

(HCBK)

was one of few winners after FBR Capital Markets reiterated its outperform rating on the stock, raising the price target to $16 from $15.

"There appear to be no surprises on the credit front, and we take comfort in HCBK's low loan to values, favorable geographies, price trends in jumbo homes, and its underwriting process," FBR analyst said in the research note. Hudson City shares ended up 25 cents, or 1.9%, at $13.12.

Meanwhile,

Citadel Investment Group

said an affiliate has terminated a trading plan it entered into earlier this month in connection with its holdings of

E*Trade Financial

(ETFC) - Get Report

.

The Rule 10b5-1 plan was to begin Monday, but no sale of E*Trade common shares has been made under the plan, Citadel said in a statement Monday. Citadel had planned to sell as much as 120 million shares of E*Trade it owns. E*Trade shares jumped 7.3% to finish the day at $1.76.