Vikram Pandit led
Citigroup (
C
)
throughout the financial crisis and was a well-known example of how
badly things went for many of the big banks during this troubled
time. Yet, Citigroup, unlike some of its competitors, just barely
survived and now appears to be nearly on its feet again.
Although the company has come back a little and seems poised to
be a global player in finance once more, it looks as though it will
not be with Pandit at the helm, as he has stepped down as the CEO
of the company. This marks a nearly five year tenure at the firm
which was rocked by incredible events, a nearly 90% share price
slump, and then the resurrection of the firm and the resumption of
dividend payments as well (see
Three Financial ETFs That Avoid Big Bank Stocks
).
Still after all this and the apparent return of Citi as a major
player, Pandit said,
in a CNBC interview
, that he felt as though now was the time to leave since Citi had
stabilized their operations and is now in a decent position
post-financial crisis. However, others are reporting that he was
forced out either over pay differences or due to clashing strategy
ideas, a strong possibility given the strange timing of the
announcement just a day after the earnings call.
Yet even with the shakeup, many analysts remain relatively
bullish on the company. The firm currently has a Zacks Rank of 3 or
'hold' while the industry rank is relatively favorable coming in
the top 20% (also see
Beware These Three Volatile Financial ETFs
).
Furthermore, some are forecasting that the departure of Pandit
will allow the company to either breakup into more profitable
pieces or it will allow the firm to get back to its roots and do
what it has done best historically. Either way, it appears as
though the market doesn't exactly hate the move, as the firm's
stock was up slightly over 1.5% in the day of the announcement.
With that being said, the company is certainly heading into a
bit of uncertainty, especially given the strange timing and
circumstances surrounding Vikram's departure from the firm. Given
this, some might want to reevaluate some of their investments in
the financial sector as we learn more about how this $100 billion
market cap firm will proceed now that it is without Pandit for the
first time in half a decade.
A look at portfolio allocations could be especially important
from an ETF perspective, as the company makes up a decent
percentage of most financial products, and a sizable chunk of many
more specialized funds in the financial ETF world. In fact,
data from XTF.com
suggests that over 100 ETFs hold Citigroup in their baskets while
almost 3% of all of the company's shares are held by these
exchange-traded funds (read
Does Your Portfolio Need a Financial ETF?
).
Below, we highlight in brief detail the three ETFs which
allocate the biggest percentage of their assets to Citigroup. While
none of these are in danger at this time, all three put more than
7.5% of their assets in the company, suggesting that if you are
holding or considering any of the following funds, you should be
paying greater attention to the still unfolding situation at
Citigroup:
Dow Jones US Financial Services Index Fund (
IYG
) -
This fund tracks a broad benchmark of American financial
corporations, holding just over 100 stocks in its basket. Currently
Citi takes the third biggest holding in the fund, accounting for
just over 7.5% of assets.
The product is relatively popular among investors having amassed
over $200 million in AUM while charging 47 basis points a year in
fees. In terms of performance, YTD the product has been quite
strong, adding about 23% in the time period while paying out a
yield just over 1.1%. Currently, the fund has a Zacks ETF Rank of 3
or 'hold' (see
Three Financial ETFs Outperforming XLF
).
RevenueShares Financial Sector Fund (
RWW
) -
For a different approach to the financial sector, investors have
RWW which takes a revenue-weighted approach. With this technique,
firms with the biggest amounts of revenue have the biggest weight
in the ETF, giving third biggest allocation (tied with JPM) to Citi
with 7.8% of assets.
Despite its unique methodology, the fund hasn't really caught on
with investors, as the product has low assets and daily volume,
suggesting a wider bid ask spread than others on the list. Still,
the fund has performed admirably in 2012, adding more than 27% in
the time period while yielding a little less than 0.7%.
Additionally, the fund has a Zacks ETF Rank of 2 or 'Buy', beating
out IYG from that perspective (read
Do ex-Financial Funds Make Safer Dividend ETFs?
).
PowerShares KBW Bank Portfolio (
KBWB
) -
This fund takes a modified market cap approach to banking stocks
that are traded in the U.S., holding 24 stocks in its basket in
total. At time of writing, Citigroup was the second biggest holding
in the fund at 8.1% of assets, just trailing BAC and barely beating
out JPM.
The product has attracted a decent following among investors as
it has over $125 million in AUM and it does volume of about 420,000
shares on a daily basis. The product is also the cheapest of the
three on the list, though its performance in 2012 has been in
between the others, adding 24.5% while paying out a 1.65% from a 30
Day SEC perspective. Much like RWW, KBWB also has a Zacks ETF Rank
of 2 or 'Buy'.
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CITIGROUP INC (C): Free Stock Analysis Report
ISHARS-DJ FN SV (IYG): ETF Research Reports
PWRSH-KBW BP (KBWB): ETF Research Reports
REVENU-FINL SEC (RWW): ETF Research Reports
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