Citigroup Stock In The Tank
Citigroup Inc shares have reached their lowest point since August. C shares closed trading yesterday at $3.99, a level not seen for several months.
C shares were as high as $5.00 in the last month, but have currently fallen out of favor with investors who fear the company is trading at adequate levels.
Right now, lending to qualified borrowers is low. That’s the business that Citigroup needs in order to start earning major profits. Instead of lending, C is hoarding cash.
Citigroup has raised its current liquidity to $450.3 billion, which is 24% of assets. Citigroup has a remarkable $245 billion of cash on its balance sheets.
The hoarding of so much cash has raised a red flag for investors who were considering putting money into the once high-flying bank company. Certainly the holding of cash helps with the financial position of the company, but it doesn’t do much for profits. Without profits, investors can’t expect to get a decent return on their investment.
Citigroup is not the only major bank to increase liquidity. Rivals JP Morgan Chase, Wells Fargo, and Bank of America have also increased their liquidity by 67% since September.
The main trouble with hoarding cash is that it isn’t being used to earn a return. The good part is, though, that you can’t lose money on cash you’re holding the same way you can by lending it out improperly.
Federal regulators want the major banks to hold higher levels of cash at least until the financial crisis has “officially ended.”
[...] for the immediate future. A big concern is that the bank company, like all the other majors, is hoarding cash. This concerns investors because it means they have a large amount of capital under management [...]