Why Citigroup (C) Stock Is Up Today

NEW YORK (TheStreet) -- Shares of Citigroup  (C)  rose 1.91% to $53.39 in afternoon trading Thursday after the Wall Street Journal reported the bank would offer mortgages at discounted interest rates as it tries to assist borrowers with low incomes or histories of sub-prime credit.

The Journal reports the bank, which is the seventh-largest mortgage lender, agreed to fund 15-year fixed mortgages with the discounted rates. The decision comes after Bank of America (BAC)  agreed to start a similar program earlier this month.

Under this new program, borrowers can pay "points," upfront fees that reduce the interest rate on a mortgage, to benefit from a greater rate discount than what they would ordinarily receive at other institutions. A point equates to 1% of the loan amount, and customers would ordinarily get a 0.25% discount on the mortgage rates for paying it. Under the new program, customers would receive a 0.5% discount.

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Separately, 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 several positive factors, 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 expanding profit margins over time. 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:

  • 40.66% is the gross profit margin for CITIGROUP INC which we consider to be strong. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, C's net profit margin of 0.78% significantly trails the industry average.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 12.9%. 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).
  • Net operating cash flow has significantly decreased to $2,012.00 million or 89.95% when compared to the same quarter last year. Despite a decrease in cash flow of 89.95%, CITIGROUP INC is in line with the industry average cash flow growth rate of -97.30%.
  • In its most recent trading session, C has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
  • You can view the full analysis from the report here: C Ratings Report

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