Ever since the financial crisis of 2008, almost every major company in the financial industry has virtually lost all of its market value. The fall of the Lehman brothers had a significant impact on the global network of our financial exposures, leaving a lot of people jobless and the economy crippled.
Big banks had substantial exposures on the practically twopenny-halfpenny mortgage-backed securities, or MBS, that ultimately led to the decline of the credit and banking industry. Most banks resorted to expanding their businesses and portfolio in emerging markets after the crisis. In the hopes of finding higher yields and a more acceptable return, Citigroup Inc. (NYSE:C) has expanded their business overseas.
Direction of the emerging markets
The last financial crisis that occurred five years ago triggered a worldwide debate regarding the health of the US economy as currencies congregated toward emerging markets. The bursting of the housing bubble caused the values of securities tied to the US real estate market to plummet.
Investors were shocked that the US economy stumbled, which forced them to look for alternative investments outside the developed countries. It led to the return of providing the most basic function of a security– providing acceptable returns.
Recently, emerging markets tumbled against the dollar as the US economy showed strong indicators of future growth and improvement. The bright prospects of the US economy have restored investors’ confidence in the financial institutions, and analysts are reporting higher targets for most of the financial institutions.
Bank of America Corp (NYSE:BAC): Analysts are giving this giant bank a target price of $13.46 compared to its current price of $12.86. Bank of America has a large asset base, with $1 trillion in deposits. The bank has been able to lower its loan to deposit ratio year over year. Analysts are expecting revenue and growth boosts ahead.
HSBC Holdings plc (ADR) (NYSE:HBC) is expected to reach a price level of $62.21 from its current market price of $51.90 by the year end. HSBC, one of the largest global banks, has a good loan to deposit ratio (less than 80%).
This deposit-led bank has focused on its growth from emerging markets. HSBC sourced 26.6% of its profit from Hong Kong in 2011, whereas this ratio has increased to 31% by now. Given the tremendous growth this bank claims from Asia, there is no stopping this one.
Citi’s overseas business perks
Citigroup Inc. (NYSE:C) is expected to end up at a level $55.69 despite its current price level of $47.97.