U.S. Retail Sales Rise 1.1%, Citigroup Net Plunges 88%

Arthi Gupta
15 Oct, 2012
New York City

U.S. indexes gained after retail sales rose more than estimated in September. Softbank agreed to acquire a 70% stake in Sprint Nextel for $20.1 billion. Citigroup earnings plummet but beat estimates.

[R]10:10 AM New York – U.S. indexes gained after retail sales rose more than estimated in September. Softbank agreed to acquire a 70% stake in Sprint Nextel for $20.1 billion. Citigroup earnings plummet but beat estimates.[/R]

U.S. indexes advanced in early trading after retail sales rose more than expected and China reported improved trade data. Citigroup reported better than expected core earnings though total net plunged after it booked charges linked to debt and a brokerage joint venture.

European indexes gained after Chinese economic data were better than anticipated with inflation easing and exports rising.

Inflation in China slowed to 1.9% in September from 2% in August, the latest data from the National Bureau of Statistics showed.

In another report, Chinese exports rose 9.9% annually to $186.35 billion and imports rose 2.4% to $158.7 billion widening the country''s trade surplus to $27.67 billion in September from $26.7 billion in August.

China’s foreign exchange reserves rose to $3.29 trillion at the end of September from $3.24 trillion at the end of June, according to latest data released over the weekend.

U.S. Retail Sales Rise

Retail sales in the U.S. rose more than estimated in September, according to a report released by the U.S. Commerce Department today,

The September retail sales increased 1.1% from a year ago to $412.9 billion following a revised 1.2% gain in August.

Non-store retailer sales rose 15% from September 2011 and auto and other motor vehicle dealers sales were up 9.3% from last year.

Separately, the New York Fed said its general business conditions index climbed to a negative 6.2 in October from a negative 10.4 in September.

Softbank to Acquire Stake in Sprint Nextel

Softbank Corp., Japan''s third largest mobile carrier will acquire a 70% stake in telecom services provider Sprint Nextel for about $20.1 billion or approximately 1.57 trillion yen.

The transaction is expected to close by mid-2013.

As part of the deal, Softbank would pay around $12.1 billion to Sprint shareholders and invest another $8 billion of new capital for other purposes, including strengthening of Sprint''s balance sheet.

The acquisition of Sprint is the largest Japanese overseas acquisition following the $19 billion purchase of UK based Gallagher Group by Japan Tobacco Inc.

The deal is likely to face regulatory scrutiny but is expected to be approved quickly as it increases foreign investment in the telecom industry that is dominated by two companies, Verizon and AT&T.

In a complex deal, SoftBank will purchase newly issues shares from Sprint at $5.25 each and also acquire $3.1 billion in seven-year debt that will convert to Sprint stock at the same price. In addition, SoftBank will pay $12.1 billion or $7.30 a share, a premium to current shareholders.

The deal is not without risks especially SoftBank is still saddled with heavy debt load in Japan after the purchase of Vodafone PLC’s Japan unit.

Earnings Review

Charles Schwab Corp. ((SCHW)), the financial services provider reported third quarter revenues rose 1% to $1.196 billion from the prior year quarter. Net income for the quarter increased 12% from a year ago to $247 million.

Citigroup Inc. ((C)), the financial services provider said third quarter total revenues declined 33% to $14 billion from the year-ago quarter. Net income in the quarter plunged 88% to $468 million or 15 cents a share compared with $3.77 billion or $1.23 a share, a year earlier.

The global bank’s earnings declined after it booked charges linked to its brokerage joint venture with Morgan Stanley and fees and expenses related to its debt.

Gannett Co., Inc. ((GCI)), the media and marketing solutions company reported third quarter net operating revenues rose 3.4% to $1.31 billion from the previous year. Net income attributable to the company surged 33.4% to $133.08 million compared to $99.79 million a year ago.