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CITIGROUP INC.

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As government shutdown drags on, shares of subprime lenders rally

01/25/2019 | 10:50am EDT
FILE PHOTO: A sign is seen above a check cashing and loan shop in Jersey City

(Reuters) - Payday lenders' stocks have emerged as big winners during the record-long U.S. government shutdown, though the updraft could prove short-lived.

Shares of pawn brokers, payday lenders and other subprime consumer finance companies have rallied and outperformed the broader market since Dec 22, when 800,000 federal workers were furloughed or left working without pay.

Pawn broker chains EZCorp and FirstCash have jumped over 18 percent since that date, with no resolution in sight over congressional Democrats refusal to approve Republican President Donald Trump's demand for $5.7 billion in partial funding for a wall along the U.S.-Mexico border.

Companies that provide payday loans and other kinds of subprime consumer credit have also rallied. Enova International, Curo Group Holding and OneMain Holdings have each surged 23 percent.


(Graphic: Shutdown stocks - https://tmsnrt.rs/2B2EX9A

Citigroup and other banks have helped with mortgage payments, overdraft fees and credit card costs to government workers, including employees from the Coast Guard, Transport Security Agency and other government workers struggling to make ends meet.

But with federal workers on Friday missing their second consecutive paychecks, some are likely turning to subprime consumer lenders. Virginia Attorney General Mark R. Herring this week warned https://www.oag.state.va.us/media-center/news-releases/1370-january-22-2019-herring-warns-virginians-about-scams-related-to-government-shut-down people to be wary of the risks associated with high-interest payday and online loans.

On Thursday, U.S. Commerce Secretary Wilbur Ross on Thursday urged furloughed federal workers facing a second missed paycheck to seek loans to pay their bills.

Investors should be also be careful, warned Piper Jaffray analyst Kevin Barker, who said any potential increase in business for payday lenders and credit card companies is likely to disappear when the shutdown ends.

"These people are going to get their paychecks eventually. The market is not going to look at this as a long-term, sustainable uplift," said Barker, who has an "overweight" rating on OneMain Holdings.

The shutdown has created uncertainty about consumer confidence, retail spending and the economy at large. Restaurants and other businesses in Washington that cater to federal employees have already taken a hit. But Wall Street has mostly shrugged off the shutdown, at least so far, even as it extends its lead as the longest in history.

Dollar Tree and Dollar General Corp, go-to retail stocks for investors expecting economic downturns and weak consumer spending, have both gained about 13 percent since the shutdown began, better than the gain of more than 9 percent in the S&P 500, but in line with other U.S. retailers.

"I don't think the market has priced in that this government shutdown is going to last much longer to where it is really going to impact GDP," said Eric Marshall, a portfolio manager at Hodges Capital Management in Dallas. "Because it has never happened this long, nobody knows exactly how to discount it."

Meta Financial Group is set to report quarterly results on Monday. EzCorp is expected on Tuesday, according to Refinitiv, followed by FirstCash on Wednesday and World Acceptance on Thursday.

(Reporting by Noel Randewich; Editing by Alden Bentley and Nick Zieminski)

By Noel Randewich and Chuck Mikolajczak


ę Reuters 2019
Stocks mentioned in the article
ChangeLast1st jan.
BYD COMPANY LIMITED -6.34% 204 End-of-day quote.0.39%
CITIGROUP INC. 0.31% 67.98 Delayed Quote.10.25%
CURO GROUP HOLDINGS CORP. 1.79% 16.5 Delayed Quote.15.14%
DJ INDUSTRIAL -0.24% 35058.52 Delayed Quote.14.56%
ENOVA INTERNATIONAL, INC. -0.22% 31.89 Delayed Quote.28.74%
EURO / US DOLLAR (EUR/USD) -0.04% 1.1815 Delayed Quote.-3.35%
EZCORP, INC. -1.03% 5.74 Delayed Quote.19.83%
FIRSTCASH, INC. -0.38% 77.66 Delayed Quote.11.31%
LETS HOLDINGS GROUP CO., LTD. -2.44% 6.41 End-of-day quote.-17.61%
LOOK HOLDINGS INCORPORATED 0.49% 1439 End-of-day quote.50.37%
NASDAQ 100 -1.12% 14956.971143 Delayed Quote.17.25%
NASDAQ COMP. -1.21% 14660.575708 Delayed Quote.15.12%
ONEMAIN HOLDINGS, INC. 1.11% 60.88 Delayed Quote.26.41%
S&P 500 -0.47% 4401.46 Delayed Quote.17.46%
SEEK LIMITED -1.21% 30.13 End-of-day quote.5.61%
THE LEAD CO., INC. -0.77% 648 End-of-day quote.-22.86%
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Financials (USD)
Sales 2021 70 849 M - -
Net income 2021 20 466 M - -
Net Debt 2021 - - -
P/E ratio 2021 6,84x
Yield 2021 3,03%
Capitalization 141 B 141 B -
Capi. / Sales 2021 1,98x
Capi. / Sales 2022 1,95x
Nbr of Employees 214 000
Free-Float 65,6%
Chart CITIGROUP INC.
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Citigroup Inc. Technical Analysis Chart | MarketScreener
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Technical analysis trends CITIGROUP INC.
Short TermMid-TermLong Term
TrendsNeutralNeutralBullish
Income Statement Evolution
Consensus
Sell
Buy
Mean consensus OUTPERFORM
Number of Analysts 27
Last Close Price 67,98 $
Average target price 83,67 $
Spread / Average Target 23,1%
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Managers and Directors
Jane Nind Fraser President, Chief Executive Officer & Director
Mark A. L. Mason Chief Financial Officer
John C. Dugan Chairman
Mike Whitaker Head-Operations & Technology
Mary Mcniff Chief Compliance Officer
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