On Nov 29, 2013, we reiterated our long-term recommendation on
) 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.
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
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
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
Fifth Third Bancorp
). All these 3 companies carry a Zacks Rank #2 (Buy).
CITIGROUP INC (C): Free Stock Analysis Report
COMERICA INC (CMA): Free Stock Analysis
FIFTH THIRD BK (FITB): Free Stock Analysis
KEYCORP NEW (KEY): Free Stock Analysis Report
To read this article on Zacks.com click here.