News Notes:Citi's Internet Calls;Best Investment Banks 2013

The IMF has reduced its estimate of world growth to 3.1%,down from 3.3% in April.For 2014,it sees China growth at 8.2% and India at 6.2%. Citigroup has initiated coverage of major Internet stocks.LinkedIn,Netflix and Facebook are rated neutral. Facebook is a relatively young company going through a transition,said Citi analyst Mark May.Amazon,Google,eBay and AOL are buys.Yelp is a sell. Key Internet themes are the shift from PCs to mobile;the emergence of adtech;and the proliferation of data. The US-China Strategic and Economic Dialogue has begun,led by Secretary of State John Kerry.BMW sees China as its top 2013 market,based on its growth in small cities. GE Oil and Gas is establishing its global headquarters in London. Global Finance magazine has named its Best Investment Banks 2013.Global winners include J.P.Morgan,Best Investment Bank;Bank of America Merrill Lynch,Best in Emerging Markets;Qatar National Bank,Best in Frontier Markets;and Goldman Sachs,Best M&A Bank. Global Finance said J.P.Morgan grew market share across the board because of its loyal client base;a long term startegy of embracing regulatory reform;a legendary corporate lending legacy;and the integration of equity underwriting talent from Bear Stearns,which it acquired in 2008. It made a world-leading 465 billion dollars for its clients through 2,164 bond deals;and earned more than 5.6 billion in investment banking fees,the best in class. JP Morgan Chase(JPM),Amazon(AMZN),Goldman Sachs(GS)

Citigroup:Growth and Reallocation

Citigroup is looking to double or triple the number of branches in China over the next few years.We think China will grow about 7%,transitioning from exports to a domestic-led economy,said Citigroup CEO Michael Corbat.That transition seems to be going well.
I'm excited to go to Japan.Their officials and executives are quite excited.It's gonna take some time to play out.They've got to try Abenomics to reflate the economy.
Japan's Prime Minister Shinzo Abe is jump-starting the economy through monetary easing and asset purchases.
We've identified 21 countries where we can get more out of the resources we have there.We'll move those resources to where we can get more out of them.It's a rebalancing,shifting them to places our customers and clients want to grow.The emerging markets, in particular the Asia Pacific,has been a big recipient of those shifted resources,Mr.Corbat noted.
Brazilian bank Itau has purchased Citigroup's Brazilian credit card unit for 1.37 billion dollars.
Citigroup(C)

Global and Regional Best Internet Banks

Global Finance Magazine has named the World's Best Internet Banks 2012,round two.They are forging leadership in mobile banking services,online payments,cash management,social media and Web design and integration,as well as in attracting new customers in growing markets,strengthening ties with existing clients and improving cyber security.
The winning banks are also quickly responding to customer demand for better service,state-of-the-art functionality and personalised service,testing new Internet tools with clients and analysing user experience to hone their product,said Infosys Technologies' Balaji Yellavalli.
The 220 bank entrants were evaluated by a judging panel from Infosys.
Global Winners
Best Overall Internet Bank:Citi
Best Corporate/Institutional Internet Bank:Citi
Best Consumer Internet Bank:Standard Chartered
Regional Winners
Best Corporate/Institutional Internet Banks
North America:Wells Fargo
Europe:Citi
Central and Eastern Europe:Bank Pekao
Latin America:Citi
Asia Pacific:Citi
Middle East/Africa:Citi
Best Consumer Internet Banks
North America:Scotiabank
Europe:ActivoBank
Central and Eastern Europe:OTP Bank
Latin America:Scotiabank
Asia Pacific:Standard Chartered
Middle East/Africa:Standard Chartered
Infosys Ltd(INFY),Scotiabank(BNS),Citigroup(C),Standard Chartered PLC(STAN:London)

Ford's Next CEO;World's Best Internet Banks

Mark Fields,who became Ford Motor Company's Chief Operating Officer on December 1,2012,is believed to the likely successor to CEO Alan Mulally when he retires in 2014.Fields,51,had been Executive Vice President and President of the Americas at the multinational automaker.He made frequent business television appearances in that role.
Global Finance magazine's World's Best Internet Bank Awards recognise banks that are innovating and prospering online.The 2012 Global Winners were as follows:
Best Overall Internet Bank:Citi
Best Corporate/Institutional Internet Bank:Citi
Best Consumer Internet Bank:Standard Chartered
The award winners are leading the way in mobile banking services;online payments;cash management;social media;Web design and integration;attracting new clients in growing markets;strengthening ties with existing clients;and boosting information security.
Rajesh Yohannan,head of Citi Asia Pacific eBusiness and global mobile,said the team has worked hard to introduce innovative features such as mobile and tablet-based location services;real time click-to-chat;electronic delivery of statements/advices;and global view of accounts.We will continually strive to raise the bar with more innovations in the Internet and mobile space to serve our customers better.
Standard Chartered has been able to attain full straight-through processing for opening credit cards;personal loans;and deposit accounts on the Internet.It allows customers to complete application forms online and submit supporting documentation through the same medium,according to Infosys.Therefore it enables the entire verification and processing for various products online.It has also boosted product cross-selling by delivering customised marketing messages based on customer behaviour,such as browsing patterns.
Citigroup(C),Standard Chartered(STAN:London),Ford Motor Company(F)

The China Trade:Outlook For Equities

The last four years,stocks have done pretty well,but with volatility,according to Chris Blum,head of Global Equities at JP Morgan Private Bank.The volatility will be much less than in the last couple of years.Global coordinated central bank action will lower volatility and get people into equities.
People expect a 15-20% pullback,but those days are history.They will be in the mid-single digits.The key is that people have rules and follow them when things get tough.
We like China.That equities market has lagged the US by 30%.China has a much better balance sheet as a country.They are deficient in human rights.As it relates to fostering growth,I think it is a fantastic system.They reach decisions behind closed doors and implement them.
Citigroup says Chinese stocks will beat those of the G20 in 2013.The Shanghai stock index has risen 3.4%,the most since June 2012.
China is burning as much coal as the rest of the world combined,notes The Washington Post.The HSBC China PMI shows manufacturing expanding at the fastest pace in two years.
iShares FTSE China 25 Index Fund(FXI)

Betting On Banking:Should You Invest in Chase and Citigroup

JP Morgan Chase reported earnings of 1.48 versus a consensus estimate of 1.16,and revenue of 24.37 billion dollars versus an estimate of 24.41 billion.We think that the numbers were good,in line,said Jason Goldberg,CFA,an analyst at Barclays.Mortgage results continue to be the story.Asset management and commercial banking also had a good quarter.
We have an overweight on the stock.We think you'll see several metrics in the right direction.They're growing the top and bottom lines.Not too bad.It is trading well below tangible book value.
The stock has outperformed the market and the sector since Jamie Dimon joined as CEO.It's certainly one of our favourites in 2013.We also like Citigroup and US Bank.
Gerard Cassidy of RBC Capital Markets thinks Citigroup is in a good position to obtain some capital return for shareholders.Their Q4 report as well as their reducing exposure to risky assets over the past 2-3 years will support their case with regulators.
JP Morgan Chase was at 46.14 in afterhours Wednesday trading,down 0.09;while Citigroup was at 41.85,down 0.17;and US Bank was at 32.70,down 0.39.
JP Morgan Chase(JPM),Citigroup(C),US Bank(USB)

Should You Invest in the Big Banks

Citigroup is viewed favourably by Todd Hagerman,Managing Director and Head of the Multinational and Regional Bank Group at Sterne Agee.Citi just announced a major restructuring,setting themselves up for the capital review programme.As well,there will be major actions over the next 6-12 months by new CEO Mike Corbat.
Citi is also well-positioned to return capital to shareholders.It has an improved regulatory situation.The ongoing US budgetary problems will cause increased volatility in the market.Buy on the dips and take advantage of it.
Sterne Agee has a buy rating on Citi,with a price target of 52.00.It has also raised JP Morgan Chase from a hold to a buy.Their regulatory risk has subsided.I don't think the risk is too high.We certainly think there will be a buyback and a dividend increase.
TD Bank has topped the Royal Bank of Canada as the leading arranger of syndicated loans among the Canadian banks.
Citigroup(C),JP Morgan Chase(JPM),Toronto Dominion Bank(TD)

Business Conditions Report:Two Magnates On Momentum

I think the US economy is the strongest in the world,said Sam Zell,Chairman and CEO of Equity Group Investments.We're likely to see improving scenarios.It's all about confidence.
The government doesn't create jobs.Jobs are created by risk-takers and businessmen.All these small businesses being starved of capital are the ones who create employment.
We monitor all our businesses.Certain ones have more relevance than others.When we see our main customers starting to delay implementation of long range plans,that's an indication of trouble.
Clearly the recovery of the housing market will increase employment.Yet Citi is cutting 11,000 jobs.If you end up with a swap,I'm not sure you're gonna end up with a net plus.
There is a little bit of momentum in the US,adds Sir Martin Sorrell,CEO of WPP Group.It's in retail,but corporates are increasingly concerned and uncertain.
Consumer spending has picked up worldwide.There is a fairly stable,even improving consumer spending regimen.It's retail,and the big branded companies continue to have traction.
Fast-moving consumer goods retailers and manufacturers in the middle got caught.There is a sort of dam of decisions.If there is a resolution of the fiscal cliff,there will be a significant shift in confidence and people will feel confident about 2013.
Chinese consumers have surpassed those in the US as the world's biggest purchasers of luxury goods.

Private Bank Views 2:Fixed Income Prospects

Asset prices are higher because the Federal Reserve is flooding the market with liquidity,said Michael Brandes,Global Head of Fixed Income Strategy at Citi Private Bank.We're still bullish on fixed income.We look at corporate bonds and mortgage-backed securities,or MBS,where we've seen very good returns.The fact that it's open ended is key.That creates the impact.
We do like dividend-paying stocks.The default risk is low and fundamentals are strong for high yield debt.MBS also offer some spread.
We are very cautious about Europe.There are a lot of concerns about the banking system and other risks on the continent.You want to be cautious about what you buy.
All this liquidity is going to help fundamentals.Fundamentals are still strong and demand is still strong.
Michael Brandes is on the Global Investment Committee at Citi Private Bank.He has a BA from the State University of New York and an MBA from Columbia University Graduate School of Business.

Managing Director:Don't Bank On Banks

This decade is the worst decade for bank revenue since the Great Depression,in the view of Mike Mayo,Managing Director at Credit Agricole Securities.After a financial crisis,things don't go quickly back to normal.Be prepared to muddle through.A muddle through scenario beats alternatives like failed institution MF Global.
U.S. banks are picking up some loans from Euro banks.You can increase funds for lending,but you can't create borrowers.U.S. debt to GDP is 8 to 1-worse than Greece.We don't have enough proper auditors.Citigroup's have been in place since 1969.
You don't have proper accounting,which creates a crisis of confidence.Let's have auditors sign their names to be accountable.Let's have less regulation,but hold the top people accountable.
We're not having capitalism the way it's supposed to operate.I feel a lot more concern about capitalism when talking to Dick Parsons,Chairman of Citigroup.Just change the characters.Bank CEOs do more damage with ill-conceived incentives,Mike Mayo noted.
Mr.Mayo,a longtime banking analyst,is the author of "Exile On Wall Street."Credit Agricole S.A. is the largest full service bank in France.It ranks second in Europe and eighth in the world.

A Columbia University View:Occupy Wall Street and Beyond

The uncertainty is huge,notes Columbia University economist Jeffrey Sachs.Will the euro survive?Will Europe survive?We shouldn't underestimate how deep we've gotten ourselves into this bind we're in right now.
What's happening at the Occupy Wall Street protests is happening all over the world.Those kids are saying it's global.From the Arab Spring to Tel Aviv to Chile,they're saying we need help;we don't have the future.
We need to be attentive to the 99%.The inequality in this country is out of control.We've been on an economic path that's not working.That top 1% is gonna have to do more,in Dr.Sachs' opinion.
Citigroup CEO Vikram Pandit said he would be happy to speak with the protesters.Their concerns are very understandable.
The protesters are active in nearly 200 U.S. cities now.In a recent poll,40% of those in the upper income bracket expressed support for the protesters-the most support of any bracket.
Dr.Sachs is Director of the Earth Institute at Columbia,which aims for a sustainable earth,and is a special advisor to UN Secretary General Ban Ki-moon.
Citigroup(C)

Global Commodity Crunch Concerning

A global commodity crunch is driving prices up with little relief in sight.Freezes in China,droughts in Russia and Australian floods,coupled with emerging market diets that are tending toward more protein and sugar,are generating costs that lead to civil unrest worldwide.
Citigroup says that corn and soybean prices will remain elevated for the next 6-12 months.U.S. corn and soybean production are down.Algerians are paying up to 30% more for staples.
Abdolreza Abbassian of the UN Food and Agriculture Organisation thinks we are entering a very precarious situation.We do not see any good news coming in from the crop side or the weather angle.In terms of prices,we are already as bad as 2008.Commodity exchange traded funds are also affecting prices as investor demand for shares continues to increase.
We would like rules and regulations and transparency by investors,Mr.Abbassian said.The weather will be the main driver in the months ahead.It is a very unpredictable and often unfavorable weather outlook,the FAO official noted.

Citigroup Back To Basics

Citigroup CEO Vikram Pandit says they are back doing what they should be doing.The economic imbalances are still there.Until the market sees credible plans for dealing with all these things,you're gonna have volatility.He believes you're gonna get real financial reform,and that's good.We've got to take a long term perspective on derivatives reform.Longer term,a safer system will benefit all of us.
Corporations need loans.The question is,how do you fund them?You've got to have a deposit base to fund them.That's the main business of a bank.Frankly,proprietary trading isn't core to Citi's business.They'll still be able to commit capital to work for their clients' behalf under the proposed Volcker Rule,although not for Citi's own behalf.
The volume of work is lower today,but Citi is doing the same work they've always done.As for the European debt crisis,the Euro's here to stay.The European Central Bank and others are making an appropriate response to the crisis.On stress tests of European banks,Mr.Pandit thinks anything you can do to put some of the questions and the issues behind us is good.The stress tests of U.S. banks restored confidence,Vikram Pandit observed.
Citigroup does business in more than 100 countries.Almost 50% of its business is non-U.S.,with nearly 35% of it in the emerging markets.

Citigroup's Emerging Markets Strategy

Geoffrey Davis of Citigroup Global Markets says the concern of Europe is now whether the global market will go into a double dip.Citi tends to think that will not be the case.What people worry about in the emerging markets is too much growth-but these are better concerns to have.
China is not Citi's favorite.Property prices may come down and interest rates may go up.Taiwan,South Korea and Russia are among their favorites.These are a good buying opportunity over the next 6-12 months.
Citi has downgraded their European outlook.The worst case scenario for a global double dip would be a big rise in U.S. unemployment or a major slowdown in China.That's what Citi would be looking for.In that case,you would go more into cash.Having already seen an 18% pullback in the emerging markets,however,Citi thinks investors should be looking another way,Mr.Davis noted.
China has indeed begun reigning in bank lending and real estate prices,fearing an overheated economy.The latest report shows a big jump in exports from China.

Indian Firm Buys Outsourcing

Tata Consulting Services,the leading outsourcing company in India,is buying Citigroup's India support operations for 505 million dollars.TCS also got a 2.5 billion dollar contract to provide outsourcing to Citi for nine and a half years.The sale is another step in Citi's divestiture program,which aims to reduce the financial firm's ancillary portfolio.Citi is also laying off 11 equity research analysts based in the U.S..About seven percent of the more than 3,000 companies currently covered by Citigroup will be temporarily discontinued.Citi expects to resume coverage of a certain number of the firms in coming quarters.It is believed that Citi's headcount will be reduced by 23,000 by the end of the year.