On Sep 2, 2013, we maintained 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, an expanding
expense base, regulatory issues along with litigation risks
Citigroup reported impressive second-quarter 2013 earnings, with
a positive surprise of about 6%. Earnings per share came in at
$1.25 for the quarter, beating the Zacks Consensus Estimate by 7
cents. Moreover, earnings were up 25% from the prior-year period,
driven by higher revenues and lower net credit losses.
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
31% from the prior-year quarter to $131 billion and represented
only 7% of the company's total asset at the end of second-quarter
Despite the overall sluggish economic environment, Citigroup's
total deposits surged 2.6% year over year in second-quarter 2013.
Therefore, deposit balances are poised to grow amid an improving
However, 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.
Following the release of second-quarter results, the Zacks
Consensus Estimate for 2013 has gone up 3.6% to $4.89 per share,
over the last 60 days. The Zacks Consensus Estimate for 2014 has
also increased by 1.8% to $5.57 per share over the same time
frame. With the Zacks Consensus Estimates for both 2013 and 2014
going up, Citigroup now has a Zacks Rank #3 (Hold).
Other Major Banks to Consider
Some major regional banks that are worth considering include
) with a Zacks Rank #1 (Strong Buy), while
The PNC Financial Services Group, Inc.
Wells Fargo & Company
) carry a Zacks Rank #2 (Buy).
BANKUNITED INC (BKU): Free Stock Analysis
CITIGROUP INC (C): Free Stock Analysis Report
PNC FINL SVC CP (PNC): Free Stock Analysis
WELLS FARGO-NEW (WFC): Free Stock Analysis
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