Balanced View on Citigroup - Analyst Blog


On Nov 29, 2013, we reiterated our long-term recommendation on Citigroup Inc. ( C ) at Neutral based on the company's global footprint and attractive core business along with its expansion in the emerging markets. Yet, a low interest-rate environment and regulatory issues along with litigation risks remain concerns. Further, considering the tepid economic recovery, we believe that robust top-line expansion will remain elusive in the near term.

Why Neutral?

Citigroup's long-term strategy to shrink its non-core assets and increase its fee-based business mix would improve the valuation over time. The run down of Citi Holdings, its legacy problem assets portfolio, is on track. Citi Holdings' assets decreased 29% from the prior-year quarter to $122 billion and represented only 6% of the company's total assets at the end of third-quarter 2013.

Despite the overall sluggish economic environment, Citigroup's total deposits surged 1.0% year over year in third-quarter 2013. Therefore, deposit balances are poised to grow amid an improving economy.

In a tepid economic recovery, bolstering revenue has become a challenge. Therefore, Citigroup continues to focus on efficiency improvement measures and expense management efforts. Notably, management aims to continue to pursue ongoing reengineering opportunities and expects to achieve $900 million of expense savings in 2013, related to repositioning actions, with full year expense savings of $1.2 billion beginning in 2014.

However, following the volatile 2012 results, Citigroup began 2013 on a positive note and continued its impressive results into the first two quarters, but disappointed in the third. Citigroup reported disappointing third-quarter 2013 earnings, with a negative surprise of about 3.85%. Earnings per share came in at $1.02 for the quarter, lagging the Zacks Consensus Estimate by 4 cents. Moreover, earnings were down 4% from the prior-year period on lower revenues.

Over the last 60 days, the Zacks Consensus Estimate for 2013 reduced 2.3% to $4.71 per share. The Zacks Consensus Estimate for 2014 has also decreased by 2.3% to $5.41 per share over the same time frame. With the Zacks Consensus Estimates for both 2013 and 2014 going down, Citigroup now has a Zacks Rank #3 (Hold).

Other Major Banks to Consider

Some better-ranked stocks in the banking sector include Comerica Incorporated ( CMA ), Fifth Third Bancorp ( FITB ) and KeyCorp. ( KEY ). All these 3 companies carry a Zacks Rank #2 (Buy).

CITIGROUP INC (C): Free Stock Analysis Report

COMERICA INC (CMA): Free Stock Analysis Report

FIFTH THIRD BK (FITB): Free Stock Analysis Report

KEYCORP NEW (KEY): Free Stock Analysis Report

To read this article on click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: C , CMA , FITB , KEY

More from

Related Videos



Most Active by Volume

  • $10.26 ▼ 6.81%
  • $15.58 ▼ 1.08%
  • $7.13 ▲ 51.06%
  • $112.12 ▲ 2.39%
  • $13.49 ▲ 0.22%
  • $27.86 ▲ 2.50%
  • $5.67 ▼ 0.18%
  • $28.07 ▲ 0.14%
As of 10/9/2015, 04:15 PM

Find a Credit Card

Select a credit card product by:
Select an offer:
Data Provided by