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Headquartered in New York, USA, Citigroup is the product of the mega-merger between banking giant, Citicorp, and non-banking financial services and insurance services behemoth, Travelers Group.
The deal was valued at more than $140 billion and it combined companies that cumulatively had assets worth over $700 billion.
Citicorp’s origins can be traced as far back as 1811 when the City Bank of New York was incorporated. The bank would grow its footprint as New York grew into America’s business and financial hub.
It became America’s largest bank before the turn of the century, and in the early 1900s, it recorded the milestone of the first bank to surpass $1 billion in assets.
On its part, Travelers Group was merged into a singular company in 1986 and admirably grew its business by making strategic acquisitions over the years of iconic companies such as Primerica Financial Services and Salomon Brothers.
The logic for the mega-merger was to expose Citicorp’s banking services to an established clientele as well as to market Traveler’s services to the bank’s retail customers.
This did not work as anticipated as Citigroup spun off part of Traveler’s business in 2002, citing its seasonality and immense drag on its stock price.
Citigroup’s massive space and exposure in the US financial sector ensured it was significantly exposed to the 2007 subprime mortgage crisis.
The company was one of the worst-hit as the 2008 global financial crisis shaped up, and only a relief package by the Federal Government salvaged its future.
The company quickly returned to profitability by 2010, and in the subsequent years, it made numerous divestitures to concentrate on its core banking and investment business and only retained profitable segments.
As of September 2020, Citigroup is a massive diversified holding company offering financial products and services. It operates via 3 key segments: Global Consumer Banking; Institutional Clients Group; as well as Corporate and Other. Its stock is listed on the NYSE, where it trades under the ticker symbol C. It is included in the Financial Services sector, under the Banks-Diversified industry.
C Stock History
Since the 1998 mega-merger, Citigroup has had 4 stock splits as follows: a 3-for-2 on June 1st, 1999; a 4-for-3 on August 28th, 2000; and a 10-for-1 reverse split on May 9th, 2011.
Citi stock was always a high-value stock and a consistent dividend payer at the turn of the millennium. It climbed from temporary lows of circa $180 in September 1998 and printed an all-time high of circa $588 in August 2000.
The subsequent retracement sent the stock to lows of circa $280 by October 2002. But the housing boom at the turn of the millennium helped support a recovery of the stock to highs of circa $550 by December 2006.
The housing bubble, coupled with the 2008 global financial crisis, was a ticking time bomb for Citi, and by February 2009, the stock had plunged to lows of below $15.
The company’s business may have recovered, but the stock is yet to mirror the pre-2007 performance and crucially for investors, the $100 psychological resistance level has not yet been breached as of September 2020.
How to Trade Citi Stock
Citi is one of the most followed stocks because of its massive footprint in our financial world. Here are some of the factors to consider when trading C stock:
- Legislative and Taxation Policy
Citi operates in an industry that has seen greater scrutiny since the 2008 financial crisis. With the government keen to ensure that such a scenario never plays out again. Citi will always be susceptible to legislation targeting the banking industry.
- Economic Conditions
Banking stocks, such as Citi, will always take a cue from underlying economic conditions. A growing economy triggers growth in the yield curve, consequently widening bank profits through higher net interest earnings. The flipside, a weakening economy, limits the scope of profitability for banks such as Citi.
- Monetary Policy
Bank stocks are very sensitive to the underlying monetary policy situation. Higher interest rates usually result in higher stock prices for banking stocks such as Citi. The Banks’ profit margins increase as rates are hiked, and because higher rates typically imply an improving economy, the rate of defaults also reduces. Conversely, lower interest rates provide headwinds for Citi and other banking stocks.
- Lawsuits and Negative PR
Citi has, in the past, attracted major lawsuits particularly for its role in the 2007 housing bubble. Some of the lawsuits have resulted in huge payoffs, including a $7 billion settlement in 2014 that punished the company for selling mortgage-backed securities to unsuspecting investors. The company has also seen its image tarnished by major scandals, such as the 2008 TARP funding, the 2007 Terra Securities Scandal, the 2005 Plutonomy report, and the 2017 accusations of manipulation in the futures market. Lawsuits and negative PR usually pressure the stock price lower.
- New Product Rollout
Citi’s new products are closely scrutinised, with investors keen to assess whether they expose the bank to unnecessary risks. Potentially lucrative, low-risk products will increase demand for the stock; but relatively high-risk products will likely provide massive headwinds for the Citi stock.
- Periodic Earnings Reports
Citigroup’s fiscal year runs from January to December and the company releases quarterly and annual corporate reports that update investors on the performance of the company. As one of the biggest financial institutions in the US, Citi’s performance is watched closely, and positive numbers will inspire higher prices, while weak figures will trigger negative sentiment.
Why Trade Citigroup Stock with AvaTrade
Here is why you should trade C stock with AvaTrade:
- Global Brand
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- Leveraged Trading
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- Go Long or Go Short
C stock has admittedly had some bad performance in the past. The stock is available as a CFD on AvaTrade platforms, which gives investors the chance to trade in both rising and falling markets.
- Trading Conditions
- Trade Citi stock with transparent pricing, competitive spreads and rapid execution on all orders at all times.
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Citigroup Stock FAQ
- Why should I trade Citigroup shares?
Citigroup is one of the largest financial services groups in the world, providing services that span retail and institutional clients, and services that include consumer banking and credit, corporate and investment banking, securities brokerage, trade and securities services and wealth management. Anyone interested in the financial services sector should be interested in trading Citigroup shares too. Traders should appreciate the great liquidity to be found in the stock, and the volatility it can display at times. Best of all, with the CFDs from AvaTrade you can trade Citigroup shares in either direction, making potential profits whether the stock rises or falls.
- Is Citigroup the best financial services stock for trading?
There are many financial services stocks that are good to trade, and Citigroup is certainly one of them. It’s not certain if this is the best stock to trade in the financial services sector, but for traders interested in large cap financial services companies Citigroup should never be overlooked. Plus, the stock does exhibit the volatility that’s not uncommon for the financial services industry, making it a good choice for traders of all styles. One of the features of an excellent trading stock is that it can work for all types of traders, and Citigroup certainly fits that description.
- What’s the best strategy for trading Citigroup shares?
Since 2018 Citigroup shares have become increasingly volatile, showing large drops and huge spikes. These moves typically evolve over the course of a week or two, so traders who are able to identify breakout moves and reversals will do well trading Citigroup shares using their usual strategies. If these moves are caught early enough there’s good profit potential in the stock several times a year. The stock can be particularly volatile around earnings, so trading the earnings releases for Citigroup can also be a good strategy, but traders do need to use tight stops if they plan on trading earnings volatility.