Citigroup May Be A Buy For The Mid- To Long-Term Investor

| About: Citigroup Inc. (C)

Citigroup (NYSE:C) may be a possible long-term consideration for investors with a 3-5 year horizon. Citigroup has been struggling since the March 2009 lows, before it conducted its 1 for 10 reverse stock split, and has been continuing the struggle since this time. However, pressures of investment banking have been felt by Morgan Stanley (NYSE:MS) and of course JPMorgan Chase (NYSE:JPM). The banks were leaders early this year, but have been strong laggards since April. Citigroup closed at $26.28 on Thursday, down over 2% year-to-date, and was down nearly 45% during 2011. Just an awful 18 months for the stock's performance.

Shares of Citigroup are being traded for roughly half of their reported June tangible book value of $51.81. They are also trading for approximately five and half times the street's consensus 2013 EPS estimate of $4.54. For this year, the consensus EPS estimate is only $4.09, so analysts are looking for EPS growth of 11% year over year. In the second quarter, Citigroup reported earnings 95 cents a share (about 2.9 billion), which was essentially equivalent to Q1 reported results. This second-quarter report, however, was a significant decline from $1.09 a share (about 3.3 billion) reported in the comparable quarter a year ago.

While there was a decline in the earnings, things are starting to look up longer term for Citigroup. It reported a total of $409 billion in consumer loans and $246 billion in corporate loans at the end of the quarter. While this represents a 2% decline in consumer loans, it also represents a 6% growth in corporate loans, for an overall 1% growth in the loan portfolio over the previous quarter. International exposure has been a major concern, and in the short term, it is definitely a headwind. However, for those investors with a longer term 3-5 year outlook, the stock could be a buy at these levels. Analysts see a large opportunity for great returns.

First, they see Citi Holdings Capital eventually being slowly released over time. Further, analyst Richard Staite pointed to the fact that they have approximately $64 billion in deferred assets. Deutsche Bank analyst Matt O'connor has a price target of about $40 for Citigroup shares, and he believes that the company will earn $4.05 per share this year, followed by $4.64 of earnings in 2013, excluding items. The second quarter was a positive sign as he recently stated, "The second quarter 2012 was a step in the right direction for Citigroup being able to deliver respectable earnings in a tough macro and capital markets environment."

Citigroup also pays a dividend, which can create a floor of support underneath the stock. At 2 cent per share, there is not such floor. However, Citigroup is aiming to hike its dividend for the first time since the 2008 financial crisis. Vikram Pandit said he expects to start discussing a larger return of cash to investors by the end of the year in the form a dividend increase. "I believe we will be in good shape and have the capital to be able to do that by the end of the year," the CEO told the U.K.'s Sunday Telegraph.

With positive analyst commentary, decent quarterly results, expected increase in performance into next year, the price to tangible book value and the possibility of a real dividend being paid, I believe Citigroup represents a potential stock to consider for capital appreciation over the next few years.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.