AP
Sector Snap: National Banks Rise
Tuesday November 27, 12:57 pm ET
Shares of National Banks Rise As Citigroup Sells Stake in Itself and Receives Upgrade


NEW YORK (AP) -- Shares of national banks moved higher Tuesday after Citigroup Inc. said it would receive a $7.5 billion investment from the Abu Dhabi Investment Authority and Punk Ziegel & Co. analyst Richard Bove upgraded the bank.

Shares of Citigroup rose 53 cents, or 1.8 percent, to $30.33 in midday trading.

The Gulf Arab state will receive up to a 4.9 percent stake in Citigroup for its $7.5 billion investment.

Bove upgraded Citigroup to a "Buy" from "Market Perform," saying the company's dividend is likely well protected and that it's moving toward improving operations.

"The franchise value of this company may be the highest of any bank in the world and an active effort is under way to improve operations and it will be successful," Bove wrote in a research note.

But not all analysts are convinced the infusion of capital will be enough. CIBC World Markets Corp. analyst Meredith Whitney said in a research note the investment is only a first step for Citigroup improving its capital base. Citigroup will also likely need to sell assets and cut its dividend to improve cash flow, Whitney wrote in the note.

Like many other banks, Citigroup has been hit by the weakening mortgage market. Mortgages, especially subprime mortgages given to customers with poor credit histories, have increasingly defaulted in recent months, forcing banks to write down the value of the loans and securities and bonds that are backed by the troubled mortgages. Citigroup has already taken more than $6 billion in write-downs and said it will take an additional $8 billion to $11 billion in the fourth quarter.

Bove also upgraded Washington Mutual earlier in the day to "Market Perform" from "Sell," saying the shares had fallen far enough. Shares of Washington Mutual rose 71 cents, or 4.2 percent, to $17.52.

Elsewhere among national banks, shares of Bank of America Corp. rose $1, or 2.4 percent, to $42.88.

JPMorgan Chase & Co. shares gained $1.57, or 3.9 percent, to $42.03.

Shares of Wachovia Corp. rose 95 cents, or 2.4 percent, to $40.02.

Wells Fargo & Co. shares gained 39 cents, or 1.3 percent, to $29.88