On May 31, 2013, we downgraded our long-term recommendation on
) to Neutral from Outperform based on the company's elevated
operating expenses, despite the ongoing efficiency saving
Why the Downgrade?
Operating expenses at Citigroup were up 1% year over year to
$12.4 billion during first-quarter 2013. Increase in expenses
reflected higher repositioning charges, partially offset by
decreased legal and related costs and efficiency savings.
Rising operating expenses remain a major concern for Citigroup.
Moreover, the company continues to encounter many investigations
and lawsuits from the investors and regulators. Though the
company resolved certain litigations related to the sale of risky
mortgage backed securities, many of the cases are yet to be
resolved. All these factors are expected to lead to increased
expenses and litigation provisions in the near term.
Further, although Citigroup's underlying franchises of the
consumer businesses have remained strong, revenues have
continuously been under pressure for the past several quarters.
Considering the protracted economic recovery and the low
interest-rate environment, any substantial growth in the top line
is expected to remain limited in the upcoming quarters.
However, following the release of the first-quarter results, the
Zacks Consensus Estimate for 2013 has gone up 1.3% to $4.73 per
share, over the last 60 days. The Zacks Consensus Estimate for
2014 has also increased by 1.5% to $5.49 per share over the same
time frame. With the Zacks Consensus Estimates for both 2013 and
2014 going up, the company now has a Zacks Rank #3 (Hold).
Other Major Banks to Consider
Some major regional banks that are worth considering include
The PNC Financial Services Group, Inc.
JPMorgan Chase & Co.
). All the 3 banks hold a Zacks Rank #2 (Buy).
CITIGROUP INC (C): Free Stock Analysis Report
COMERICA INC (CMA): Free Stock Analysis
JPMORGAN CHASE (JPM): Free Stock Analysis
PNC FINL SVC CP (PNC): Free Stock Analysis
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