3 Reasons Why Citibank Can Cut Its Cash Holdings

  Google+  Twitter | + More Articles
  • Like on Facebook
  • Share on Google+
  • Share on LinkedIn
source: http://www.lifelovesexandmoney.com/wp-content/uploads/money.jpg

source: http://www.lifelovesexandmoney.com/wp-content/uploads/money.jpg

Citigroup (NYSE:C) has considered reducing the amount of cash it keeps on hand by approximately $35 billion, a move that could help the bank buy higher yielding assets or redeem expensive debt to boost earnings, reported Reuters Wednesday. Here are several reasons why this decision is possible and why it would benefit the financial institution:

The decision reflects a turning tide

NEW! Discover a new stock idea each week for less than the cost of 1 trade. CLICK HERE for your Weekly Stock Cheat Sheets NOW!

Cutting its cash on hand would signal to investors and analysts that Citigroup — which had to be rescued by the United States government three times during the financial crisis — is increasingly confident that the majority of its problems are in the past.

Citigroup now poses a sharp contrast to JPMorgan Chase (NYSE:JPM), which emerged from the financial crisis stronger than any of the other major U.S. banks. During that period, JPMorgan was even called upon by U.S. authorities to help salvage failed financial institutions. It may seem surprising that Citigroup has the ability to reduce its cash levels, given its past, especially when its once-stronger rival has estimated that its capital levels are 17 percent below the amount required by the Basel III levels that will be required by 2019. In recent years, Citigroup has had to be more careful than its competitors because investors and regulators have had less confident in its stability following the crisis. But that opinion has changed as the bank’s fortunes have improved…

More Articles About:

To contact the reporter on this story: staff.writers@wallstcheatsheet.com To contact the editor responsible for this story: editors@wallstcheatsheet.com

Yahoo Finance, Harvard Business Review, Market Watch, The Wall St. Journal, Financial Times, CNN Money, Fox Business