Seeking Alpha

Citi added to BAML's U.S. 1 Focus List

  • "We believe bank stocks deserve to trade below tangible book if: 1) balance sheet risk threatens TBV; or 2) it can't earn its cost of capital. We think Citigroup (C +1.1%) will disprove these worries over the next 12 months," writes analyst Erica Najarian. "We believe the pullback in the stock has created an especially compelling entry point for investors."
  • The bank trades for 0.9x Dec. 31 tangible book value of $55.38, and at 8.4x consensus 2015 earnings - among the cheapest ratios for all U.S. bank stocks, and the only big-cap bank trading at less than tangible book.
  • At root of this is Citi's exposure to struggling emerging markets - last year 56% of bank revenue and 62% of adjusted net income came from outside of the States. Najarian's team ran brutal scenarios occurring all at once in Mexico, Hong Kong, Korea, and India - and came up with just a 7% hit to EPS, but continued growth in TBV.
  • There's also increased deployment of excess capital to look forward to - mainly share repurchases - thanks to the continued wind-down of (capital-intensive) Citi Holdings assets and the recapture of the DTA.
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Comments (2)
  • DeepValueLover
    , contributor
    Comments (10012) | Send Message
    Quick reminder:


    "Outside of the U.S." and "emerging markets" aren't ALWAYS the same thing.


    Citi does business in Germany, France and Japan, for example.
    7 Feb 2014, 01:11 PM Reply Like
    , contributor
    Comments (3320) | Send Message
    C is a bona fide buy here , short or long term.


    Financials will start leading this market upward again Soon .


    Be on board with at least C, and JPM and enjoy the ride.
    8 Feb 2014, 04:12 PM Reply Like
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