Citigroup
has long been a disappointing stock for investors and it is proving to be a head-scratcher for
Wells Fargo
Securities analyst Mike Mayo.
Shares of
Citigroup
(ticker: C) are down 37% since Jane Fraser became chief executive in March 2021. That lags the
SPDR S&P Bank ETF
(KBE), which is down 21% over the same period as well as the
S&P 500,
which has gained 18% since then. Even worse, the stock trades at roughly half of its tangible book value—its lowest since the global financial crisis, Mayo notes.
Citigroup’s stock is “pricing in too much fear,” Mayo wrote Tuesday. “We estimate tangible book value increasing from $85 to ~$100 by 4Q25 because—unlike many past times—we don’t see holes in the balance sheet.”
Accordingly, Mayo has an Outperform rating on shares and a $55 price target, implying 32% upside from recent trading levels.
While Citigroup shares have lagged— over the last five years, its shares are down 40% while the KBE is down by 20%—the bank’s issues predate Fraser’s tenure. Fraser, in fact, was brought in to lead a turnaround at the bank after a series of missteps under its previous CEO, including missed financial targets and regulatory fines for weaknesses in its risk management and internal controls.
Mayo sees several positives for the stock. Many banks are being more cautious about share repurchases after a slew of bank failures this spring led regulators to call for higher capital requirements in the sector. But Mayo expects that repurchases at Citigroup should account for 6% of the bank’s market cap this year, 9% in 2024, and 18% in 2025.
Mayo also believes costs will be less of an issue for Citigroup as it continues the streamlining it embarked on when Fraser took the lead. Among its initiatives, Citigroup has exited operations in 14 countries, preferring to focus on more profitable regions, ultimately making the bank more efficient.
And if that isn’t enough for most investors, Mayo takes comfort in who does own the stock.
“Even Warren Buffett still owns the shares,” he wrote.
If Citigroup is good enough for the Oracle of Omaha, it may be a winner for other investors.
Write to Carleton English at [email protected]
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