Citigroup Rally Lifts Financial ETFs

by on October 16, 2012 | ETFs Mentioned:

The bulls jumped into Citigroup (C) today after Wall Street icon Vikram Pandit stepped down as the bank’s chief executive officer. Shares of Citigroup soared to a high of $37.40 on the day bolstered by record trading volumes as investors expressed their improving outlook for the banking giant. The rather surprising departure of Pandit came a day after the bank rallied upwards of 5% after reporting better-than-expected quarterly earnings results [see Free 7 Simple & Cheap ETF Portfolios].

On 10/16/2012, Citigroup reported a net income of $468 million, marking a major decline from its previous figure of $3.8 billion in the quarter one year ago. One of the big reasons behind this miss however is the fact that Citigroup has agreed to sell its stake in the Morgan Stanley Smith Barney brokerage unit; excluding the loss on this sale, Citigroup actually posted a profit of $3.27 billion [see also Financials Free ETFdb Portfolio].

Citigroup Cheers On Corbat

Markets cheered on Pandit’s resignation given the persistent tension between him and the bank’s board since the financial downturn. Citigroup’s board chairman, Michael O’Neill, was particularly critical of the long-time CEO’s management style; other board members also said Pandit lacked the vision and foresight necessary to turn the bank around. Alongside the CEO stepping down, John Heavens, Citigroup’s president and longtime associate of Pandit, also resigned. Effective immediately, Pandit will be succeeded by the head of Citigroup’s European and Middle Eastern Division, Michael Corbat. The new CEO was welcomed by the board as he expected to refresh the firm’s management structure.

It’s no surprise that Citigroup’s bullish behavior has resonated well for financials-focused ETFs as this banking juggernaut can be found in the top-ten holdings list in a number of funds. The ETFs highlighted below allocate at least 6% of their total assets to shares of Citigroup:

  • RevenueShares Financials Sector Fund (RWW): Citigroup holds the number four spot in this portfolio, trailing behind behemoths like Berkshire Hathaway (BRK.B), JPMorgan Chase (JPM), and Bank of America (BAC). RWW seperates itself from competitors by weighing its underlying holdings by top-line revenue isntead of market-capitalization.
  • PowerShares KBW Bank Portfolio (KBWB): Citigroup holds the number five spot in this portfolio, trailing behind Wells Fargo (WFC), U.S. Bancorp (USB), Bank of America and JPMorgan Chase. This ETF features a narrower portofliof holdings than other broad-based competitors as it focuses specifically on banks and thrifts.
  • iShares Dow Jones U.S. Financial Services Index Fund (IYG): This ETF, which holds over 100 U.S. companies operating in the financial services industry, features Citigroup as its third largest holding, right behind the usual suspects Wells Fargo and JPMorgan Chase.

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Disclosure: No positions at time of writing.