Like all other sector players that Citigroup has met on its Scandinavian visit, the group is "cautiously optimistic", the broker said.

Atlas Copco plans to grow via increased aftermarket share in the business mix, more focus on new products in Asia, and acquisitions.

The group has not been very active in terms of acquisitions so far but Citigroup expects that this will change in the short term.

So far in 2009, the development of Atlas Copco's share has underperformed the sector. However, the broker did not recommend investors to buy the stock in the present situation due to the relatively high valuation.

Atlas Copco is currently traded at a premium versus the sector and its own ten-year average price-to-earnings (P/E) ratio, which means that the recovery potential is already included in the valuation, Citigroup said.

By 11:13 CET on Friday, the B-series shares in Atlas Copco were down 0.33% to SEK89.40 on the OMX Nordic Exchange in Stockholm.

(EUR1 = SEK10.3)

Comments on this story may be sent to 
nbr.feedback@nordicbusinessreport.com

--Long-term Issuer Default Rating (IDR) at 'A+';

--Short-term IDR at 'F1+';

--Support rating at '1';

--Support rating floor at 'A+'.

The affirmation of Citi's ratings reflect Citi's continued systemic importance and the high level of capital and funding support from the U.S. government. The U.S. government's ownership interest in Citi stood at 34% following the completion of Citi's exchange offer which converted the bulk of preferred and a portion of trust preferred securities to common equity. This exchange boosted tangible common equity (TCE) by approximately $60 billion.

The upgrade of Citi's Individual rating recognizes improvements in Citi's capital, liquidity and funding structure combined with meaningful reductions in troubled capital market exposures and non-core businesses. Following the completion of Citi's exchange offer, its TCE and Tier I common equity ratios now appear relatively strong. That said, these ratios must continue to be viewed in the context of Citi's comparatively higher asset quality problems and weaker operating earnings.

Non-core assets have declined by approximately $100 billion since the beginning of 2009 with broad-based declines in various loan and securities categories. The recently completed sale of Nikko Cordial along with continued progress working down other portfolio categories will result in a further reduction in fourth quarter 2009. However, non-core assets remained substantial at over $600 billion (approximately one-third of Citi's balance sheet). Consequently, fully winding down non-core assets likely will be a multi-year task.

The Positive Rating Watch on the Individual rating incorporates the improvements in capital as well as the possibility of stabilizing loan portfolio quality and overall financial performance. There are early signs credit losses may be leveling off although much depends on the future direction of U.S. housing and unemployment as well as a continued turnaround in delinquency trends in key international markets. Notably, Citi is expected to benefit from its limited commercial real estate (CRE) loan exposure compared with U.S. peer banks. In Fitch's rating criteria, a bank's standalone financial strength is reflected in Fitch's Individual rating and the prospect of external support is reflected in Fitch's support ratings.

For the trust preferred rating, the Positive Rating Watch reflects a much improved capital composition following the exchange plan. TCE has become the dominant portion of the capital structure at approximately 70% of total capital compared with approximately 30% before the exchange plan. Going forward, aggregate coupon costs on preferred instruments will decline by approximately $1 billion per quarter. The Positive Rating Watch on trust preferred instruments also acknowledges stronger holding company liquidity and the potential for stabilizing financial performance.

A positive resolution of the Rating Watch would hinge on the following major factors including: continued stabilization of core operating results and asset quality, further progress in reducing non-core assets, and maintenance of a solid capital position. Fitch will assess the prospective stability of Citi's liquidity and funding profile as Citi ends the use of government funding support, including guaranteed debt issues under the FDIC's TLGP program and unlimited coverage of demand deposits through the FDIC's TAG program. Further, Fitch would factor in any capital impact on possible repayment of TARP capital.

The following Ratings have been upgraded and placed on Rating Watch Positive:

Citigroup Inc.

--Individual to 'D/E' from 'E'.

Citibank, N.A.

--Individual to 'D/E' from 'E'.

Citibank (South Dakota), N.A.

--Individual to 'D/E' from 'E'.

Citibank Banamex USA

--Individual to 'D/E' from 'E'.

The following Ratings have been affirmed with a Stable Outlook:

Citigroup Inc.

--Long-term IDR at 'A+'

--Senior unsecured at 'A+'

--Subordinated at 'A'

--Preferred at 'C'

--Short-term IDR at 'F1+'

--Support at '1'

--Support Floor at 'A+'

--Long-term FDIC guaranteed debt at 'AAA'

--Short-term FDIC guaranteed debt at 'F1+'

Citigroup Funding Inc.

--Long-term IDR at 'A+'

--Senior unsecured at 'A+'

--Short-term IDR at 'F1+'

--Short-term debt 'F1+'

--Long-term FDIC guaranteed debt at 'AAA'

--Short-term FDIC guaranteed debt at 'F1+'

Citigroup Global Markets Holdings Inc.

--Long-term IDR at 'A+'

--Senior unsecured at 'A+'

--Subordinated 'A'

--Short-term IDR at 'F1+'

--Short-term debt at 'F1+'

Citibank, N.A.

--Long-term IDR at 'A+'

--Long term deposits at 'AA-'

--Short-term IDR at 'F1+'

--Short-term deposits at 'F1+'

--Support at '1'

--Support Floor at 'A+'

--Long-term FDIC guaranteed debt at 'AAA'

--Short-term FDIC guaranteed debt at 'F1+'

Citibank International PLC

--Long-term IDR at 'A+'

--Short-term IDR at 'F1+'

--Support at '1'

Citibank (South Dakota), N.A.

--Long-term IDR at 'A+'

--Long-term deposits at 'AA-'

--Short-term IDR at 'F1+'

--Short-term deposits at 'F1+'

--Support at '1'

--Support floor at 'A+'

Citibank Banamex USA

--Long-term IDR at 'A+'

--Subordinated at 'A'

--Long-term deposits at 'AA-'

--Short-term IDR at 'F1+'

--Short-term deposits at 'F1+'

--Support at '1'

--Support Floor at 'A+'

CitiFinancial Europe plc

--Long-term IDR at 'A+'

--Senior unsecured at 'A+'

--Senior shelf at 'A+'

--Subordinated at 'A'

Citigroup Derivatives Services LLC.

--Long-term IDR at 'A+'

--Short-term IDR 'F1+'

--Support at '1'

Citibank Canada

--Long-term IDR at 'A+'

--Long-term deposits at 'A+'

Citibank Japan Ltd.

--Long-term IDR at 'A+'

--Short-term IDR at 'F1+'

--Support at '1'

Commercial Credit Company

--Senior unsecured at 'A+'

Associates Corporation of North America

--Senior unsecured at 'A+'

--Subordinated at 'A'

Egg Banking plc

--Senior unsecured at 'A+'

--Subordinated 'A'

The following Ratings have been removed from Rating Watch Negative and placed on Rating Watch Positive:

Citigroup Capital III, VII, VIII, IX, X, XIV, XV, XVI, XVII, XVIII, XIX, XX, XXI, XXIX, XXX, XXXI, and XXXII

--Trust Preferred 'B'.

Adam Capital Trust III, Adam Statutory Trust III-V

--Trust Preferred 'B'.

Additional information is available at 'www.fitchratings.com'.

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE.

SOURCE: Fitch Ratings

Fitch Ratings, New York 
Joseph S. Scott, +1-212-908-0624 
Christopher D. Wolfe, +1-212-908-0771 
Media Relations 
Brian Bertsch, +1-212-908-0549 
brian.bertsch@fitchratings.com

Here are highlights from Monday's Analyst Blog:

Citi to Sell Stake in Bellsystem24

Citigroup Inc. (NYSE: C) announced that it will sell stake in Bellsystem24 to U.S. private equity firm, Bain Capital Partners, in a deal that values the Japanese call center operator at $1.1 billion.

The company announced on Sunday that it will sell its 93.5% controlling stake in Bellsystem24 -- which it held through its Citigroup Capital Partners Japan Ltd. -- to Bain Capital Partners through a tender offer. The tender offer is expected to start on or before Nov 20 and be completed on Dec 30, 2009. Under the terms of the deal, Citi will receive 93.5 billion of yen ($1 billion) in cash.

Following the completion of the deal, Citi Holdings' assets will be reduced by $1.2 billion. However, Citi's net income and capital ratios will not be significantly impacted by this stake sale, the company said.

Liberty to Acquire Unitymedia

Liberty Global Inc. (Nasdaq: LBTYA) announced it will acquire all of the issued and outstanding capital stock of Unitymedia GmbH, the second largest cable TV operator in Germany. The total consideration will be approximately $5.2 billion. Liberty Global will acquire 100% of the shares of Unitymedia for an equity purchase price of around $3 billion and will also assume around $2.2 billion of net outstanding debt of Unitymedia. The deal is expected to be completed by the first half of 2010 subject to regulatory clearance.

Liberty Global is the second largest cable TV operator in the world. However, it is the largest international cable TV operator since Comcast Corp. (Nasdaq: CMCSA), the largest cable MSO in the world does not have any operation outside the U.S. As of now, the company has approximately 16.6 million customers in 14 nations, most of which are in Europe. On the other hand, Unitymedia has approximately 6.4 million RGUs (revenue generating units); including 4.5 million analog and digital basic cable subscribers and 1.9 million new service RGUs (digital TV Pay, retail broadband internet, wholesale MMA internet, and telephony).

Germany is one of the lucrative markets in Europe. In 2002, Liberty Global has failed in its attempt to acquire the cable TV business of Deutsche Telekom AG (NYSE: DT). Unitymedia has the highest uptake of digital TV and highest RGU per household in Germany. Integration of Unitymedia's operations with Liberty Global will create a formidable cable TV player in Germany to compete with Kabel Deutschland (the largest cable TV operator in Germany), Deutsche Telekom and Vodafone Plc (NYSE: VOD).

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