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A report today in Financial Times suggests that "U.S. regulators put direct pressure on Citigroup (NYSE: C) to replace its finance chief only weeks before his surprise departure." As part of a June-dated agreement with regulatory officials, Citi reportedly agreed to consider replacing CFO Ned Kelly prior to October, says the newspaper. Upon learning of the pact, Kelly tendered his resignation. (He later accepted a new role as the bank's vice chairman.)
Neither Citigroup nor regulatory officials have publicly confirmed or denied the reports of government meddling. However, it would hardly be the first time that the U.S. has clamped down on Citi, in which it now holds a 34% stake. Earlier this year, the banking issue opted not to accept delivery of a new corporate jet, following a rather strong suggestion from President Obama.
Judging by C's price action, there's a dismal downside to surviving on government life support. While sector peers such as Bank of America (NYSE: BAC) have rallied in recent months, C shares continue to be pinned by resistance at the $4.50 neighborhood. This technical level has capped the stock's progress throughout the bulk of 2009.
Despite a veritable tidal wave of short-covering support during the past month, as evidenced by a 71.4% drop in short interest, the equity has been unable to climb past this barrier. C's inability to benefit from the recent influx of buying pressure hints at lingering weakness in the security.
Elizabeth Harrow is an analyst and financial writer in the research department at Schaeffer's Investment Research. She is featured in the video series Schaeffer's Daily Q&A on SchaeffersResearch.com.
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