By Karen Schwartz
Citigroup (C) and other US banks got some potential good news this week as the Financial Accounting Standards Board backed off from its plan to make banks use market values to calculate how much the loans on their books are worth. Meanwhile the US Treasury began an auction of 465.1 million of Citi warrants it holds. Zacks notes that the offloading of stake and warrants by the Treasury is a positive for Citi as it reduces the government overhang on the stock.
These and other factors have led several analysts to nudge their 12-month price targets up since the bank reported quarterly earnings last week.
The median 12-month price target of 15 sell-side and independent analysts tracked by Alacra Pulse is $5.50, up from $5.00 in our last prognosis in mid-November. The mean is $5.59, which would be a gain of 16% from Tuesday’s close of $4.82.
Of these analyst, 10 have a positive rating and five are neutral.
Current 12-month price targets of selected sell-side and independent analysts.
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Sanford Bernstein’s John McDonald has the highest target at on the stock at $6.76, followed by JP Morgan’s Vivek Juneja at $6.50. McDonald wrote that core earnings’ quality was “soft given higher operating expenses,” but “credit continues to improve and Citi’s balance sheet looks solid. We see good long-term value in Citi’s shares.”
At the other end of the scale, Credit Agricole CLSA’s Mike Mayo has a $4 target and Collins Stewart’s Todd Hagerman and Susquehanna’s David Hilder both have “Neutral” ratings and $4.5 targets.
Atlantic Equities analyst Richard Staite lifted his price target on Citi to $6.30 from $6, after reassessing his valuation of Citi’s various businesses to find that shareholders may benefit even more from its divestiture of noncore assets.
TheStreet reports that according to Staite’s analysis, Citi’s core Citicorp division – which holds assets the firm plans to keep – is worth $5.35 per share. But Staite believes the upside lies in Citi’s noncore division, known as Citi Holdings, which he says is worth 95 cents per share.
Oppenheimer lowered its estimates on Citigroup. Oppenheimer’s Chris Kotowski noted that expenses came in $1 billion above his target, and that ”the performance on expenses was somewhat disappointing in light of revenue trends,” though not a “game changer” for his buy rating. He has a $5.50 price target on the stock.
Nomura’s Glenn Schorr called it “altogether, a soft quarter,” for the company, which Standard & Poor’s Erik Oja said missed profit estimates “because of a larger-than-expected 11% revenue decline versus third quarter.”
Credit Suisse’s Moshe Orenbuch, who has an “Neutral” rating on the stock and a price target of $5.75, said the bank should “expect to reimburse buyers between $2.2 billion and $4.3 billion for defective mortgages originated from 2005 to 2008.”
Sources: AlacraPulse, BloomberBusinessWeek, Fox Business, TheStreet.com, MarketWatch, CNN Money, Dealbreaker, WSJ Deal Journal, Financial Post, Zacks.