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Why Shares of Citigroup and Other Big Banks Were Down Monday

Lou Whiteman, The Motley Fool

What happened

Shares of Citigroup (NYSE: C) fell more than 5% on Monday as financial stocks got caught up in a broader sell-off related to the potential escalation of the trade war between the U.S. and China. Citi, the major U.S. commercial bank with the most international exposure, was hit more than most.

So what

Banks were among the sectors hardest hit on a rough day on Wall Street, as a lack of progress in trade talks between the U.S. and China, and a threat by China to impose new tariffs on U.S. agriculture and other products, caused investors to head to the sidelines.

A trader is devastated by a falling stock chart.

Image source: Getty Images.

Citi, down 5.18% at the close, fell further than peers including JP Morgan Chase, Wells Fargo, and Bank of America (NYSE: BAC). While all of those banks have exposure to the U.S. economy, Citi by far has the most international exposure. Citigroup generates more than half of its revenue outside of North America, including from a major presence in Asia. Bank of America, by contrast, generated 12% of 2018 revenue overseas.

Asia was already a point of concern for Citigroup investors. Last month, the bank reported Asia consumer revenue was up just 1% year over year in the first quarter as growth in deposit, lending, and insurance revenue was offset by lower investment revenue.

Bank of America, the largest U.S. retail bank, was also down more than 4%. The company is the nation's fourth-largest agriculture lender, meaning it has significant exposure to the part of the U.S. economy China is targeting with its tariffs. 

Now what

Citi is cheap relative to its peers, and the company is on track to return at least $60 billion to shareholders in the years to come. But even after this recent trade-related sell-off, the stock is still up 24% year to date.

For investors with a tolerance for risk and a willingness to wait out a trade war, it might be a good time to give Citigroup shares a look. But given the headline risk and the bank's exposure to Asia, be warned there could be more down days in the weeks to come.

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Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.