For this week’s Monday’s Market Movers entry, let’s take a look at the profits Citi Financial is currently reporting.  As of this past Friday, March 13, the Dow and the S&P 500 stock indexes rose for a fourth straight day.  This rise in the stock market came shortly after Citigroup announced that it did not need any more governmental aid.  Wait a second-let’s digest this information.  So this means that following President Obama’s massive bailout plan, which aimed to ultimately restore stability to the banking industry-Citigroup is actually reporting a profit?  Following a global financial crisis, Citigroup actually has good news to report?  Let’s take a look at how Citigroup is managing to slowly climb back to the top-and what this good news ultimately means for you, the consumer.

Apparently 2009 is not looking so bleak for Citigroup.  Citigroup CEO Vikram Pandit sent a letter to employees, reporting that the company is having its best quarter since the last time it reported profits, during the summer of 2007.  During January and February of 2009, Citigroup’s operating revenue was $19 billion, $2 billion less than the 2008 full-quarter average. As mentioned above, the stock market displayed a clear reaction to this  surprisingly uplifting memo, raising Citigroup shares 38 percent.

So how is this possible amidst a financial crisis?  Well, the memo that Pandit sent to employees communicated that Citi’s deposits were “relatively stable.”  Pandit also reported that the company has conducted its own “stress test”, based on tougher criteria than what the federal government is currently using to test the nation’s 19 largest financial institutions; he concluded that he is “confident about our capital strength….client businesses are strong, our deposits are relatively stable, our client-driven securities and Banking businesses have been performing well…and we continue to provide credit to consumer and corporate customers.” Pandit further displayed his commitment to getting Citigroup back on top by agreeing to a $1 annual salary until Citi becomes profitable again.

Furthermore, on December 1, Citigroup cut all sources of online, unsecured loan applications.  This means that Citigroup has basically stopped collecting these loan applications from all websites except their own.  The number of Citi credit cards, featured on websites like credit.com, dropped from a high of 19 total cards to only 3 currently.  For consumers like you, this means that you can easily get access to credit through Citi.

So things, for the moment, are looking up for Citigroup.  As a result, things are looking up for consumers when it comes to getting access to credit.  Despite the good news, Citigroup is pushing the need for Americans to save by making smart financial decisions.  In order for both banks and individuals to climb their way out of this financial crisis, we need to change our spending habits.

For the first entry in Friday’s Financial Fitness series, we thought it would be appropriate to discuss how your credit score impacts your borrowing opportunities.  You hear everyone talking about the importance of raising your credit score to “improve your credit.”  But what does this improved credit bring?  Which specific advantages will you have by doing so?  Bottom line: why should you be motivated to raise your credit score?  Let’s take an in depth look at an important advantage you will have-why raising your credit score increases the amount of opportunities you will have to borrow in the future.

First, it is important to review what your credit score represents.  Your credit score is basically a snapshot that assesses your financial stability.  It tells a story of how much outstanding debt you have, how much debt you have already paid off, as well as the likelihood that you will pay your bills on time in the future.  Ranging from 300 to 800, the higher your credit score, the better.

Raising your credit score puts you in healthier financial standing, which in turn makes it easier to borrow.  How does this work?  Let’s say you are looking to buy a house.  You have a plan-you have been looking at houses and you’re ready to take the plunge.  After assessing the amount of money you have in the bank to pay your down payment and your future mortgage, you realize that in order to make your dream of owning a house a reality, you need a loan.  When you meet with a potential lender, they will be basing their decision about whether or not to grant you a loan on the amount of risk you present.  Banks need to have a certain level of confidence that you are going to be able to pay back this loan over time, which comes in the form of your monthly mortgage payment.

So where can they look to determine the risk they’re taking?  Banks go straight to your credit report.  They want to see how much debt you have and how on-time you are with other payments.  Since they may know nothing about you prior to your loan appointment, this is a sure-fire way for them to assess your financial situation.  With good credit, you will increase your chances of getting that loan approved in the first place.  Also, once your loan is approved, having good credit will lower the interest rate the bank charges you each month.  Over the life of a 15 to 30 year mortgage, a lower interest rate can save you thousands and thousands of dollars!  If you have what the bank considers bad credit, they may not approve the loan in the first place, as they may feel that your payment history is not reliable.  If they do approve your loan, despite your bad credit, your interest rate will certainly be higher.  Furthermore, the initial down payment on your dream house will be higher because of your low credit score.

So the next time you hear someone mention the importance of raising your credit score, know that doing so will not only give you peace of mind; it will also increase the amount of opportunities you have to borrow money in the future-at a lower interest rate!

For our first entry in Wednesday’s Washington Weekly, let’s discuss an issue that has been a topic of conversation in almost every American home-the housing crisis.  Millions of Americans are feeling the effects of the subprime mortgage meltdown.  Many have lost their homes or are currently in danger of meeting that same fate, as they cannot afford mortgages that at one time appeared affordable.  No matter where you want to point the finger-at the lenders, at the borrowers, at the brokers-the next step in this discussion needs to focus on the solution.

So what is President Obama’s proposed solution?  How does our new commander-in-chief propose that we dig ourselves out of this crisis?  Obama’s “Making Home Affordable” plan aims to work with lenders to modify loan terms and to create more affordable fixed-rate loans.  Approximately 4 million Americans will benefit from the modified terms, while 5 million Americans will be granted the more affordable fixed-rate loans.  The 9 million Americans who will reap the plan’s benefits must fall in the category of borrowers who owe up to 5 percent more than their home’s current value.  If you fall into this category, you must submit your most recent tax return, two pay stubs, and an “affidavit of financial hardship.”  The conditions of the housing plan dictate that borrowers will only be allowed to have their loans modified once; furthermore, the loans needs to have been granted on or before January 1, 2009, and must either be backed by Fannie Mae or Freddy Mac.

So how is Washington responding to the fact that the “Making Home Affordable” leaves out the rest of homeowners who owe more than 5 percent of their home’s current value?

Secretary Tim Geithner commented:

“Two weeks ago, the President laid out a clear path forward to helping up to nine million families restructure or refinance their mortgages to a payment that is affordable now and into the future.  Today, we are providing servicers with the details they need to begin helping eligible borrowers.”

This is only the beginning of a plan that will, over time, trickle down to help other Americans caught in the midst of the subprime mortgage crisis.  A crisis of this size, with this much money involved, cannot be solved overnight.  For more information regarding the details of President Obama’s housing plan, visit www.financialstability.gov.

Europe’s largest bank, The Hong Kong and Shanghai Banking Corporation (HSBC), announced that it will scale back its US lending as a result of failed sub prime mortgage investments.  Coming off of their worst quarter ever, HSBC will be eliminating 6,100 jobs nationwide by closing all 800 of its Household Finance & Beneficial Offices here in the US.

So what happened to HSBC’s profits?  In 2007, HSBC reported profits of $19.1 billion.  Their 2008 profits came in at a much less $5.7 billion.  Unable to predict the deterioration of the US economy, HSBC purchased Household International six years ago for $14 billion.  This purchase made HSBC the largest subprime mortgage lender in the US.  Forming the Household Finance & Beneficial offices, this unit began lending money to borrowers that did not have strong credit history.  What was predicted to be a successful and profitable acquisition turned ugly in 2008, when consumer loans considered 60 or more days delinquent rose dramatically from 7.7% to 12.5%.

Stephen Green, group chairman for HSBC, stated that “In light of this, we have taken the difficult decision that, with the exception of credit cards, we will write no further consumer finance business through the Household Finance and Beneficial brands in the U.S., and will close the majority of the network.”

In official statements, HSBC has promised that despite the halt on its consumer lending practices, it will continue to help its current customers pay off their loans, helping them avoid foreclosure.

What does this mean for me?  Green also vowed that HSBC is “not turning our backs on the US“, as they will continue to issue and promote credit cards.  Simply stated, this is good for consumers!  The credit card HSBC is bringing back, Orchard Bank card, is their subprime card for bad credit borrowers.  Originally pulled from the web on December 1^st of 2008, it is available again for consumers.  With the lowest rate among subprime cards, HSBC’s Orchard Bank Card does not have outrageous upfront fees to pay. This card is designed for people who are looking to rebuild their credit.

To sum it up: HSBC’s decision to discontinue its consumer lending business actually benefits the millions of consumers who are looking to re-establish a strong credit history.  It is important to remember that you have many options when choosing a credit card company, as companies like HSBC promote specific credit cards to help people with poor credit.  Check out sites like Credit.com to learn more about the various credit card options you have as a consumer.