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Citigroup Will Be A Long-Term Winner

May 05, 2020 9:25 AM ETCitigroup Inc. (C)28 Comments
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WG Investment Research


  • Citigroup's stock has significantly underperformed the broader market so far in 2020.
  • The bank recently reported Q1 2020 results and, as expected, earnings were under pressure due to the poor economic outlook caused by COVID-19.
  • In a broader context, many experts believe that we are already in a recession, which will likely have a negative impact on the bank's stock in the near term.
  • I'm long Citigroup, and I have no plans to reduce my overweight position in the near future.

Citigroup's (NYSE:C) stock has significantly underperformed the broader market so far in 2020.

However, it should be noted that Citigroup shareholders are not the only ones that have had to deal with the pain of a falling stock price.

Source: Fidelity

The COVID-19 related concerns, in addition to the deteriorating interest rate environment, have wreaked serious havoc in the financial sector. I believe that the stock market (and C shares) will face further downward pressure in the near term as more companies report on the financial impact of the COVID-19 spread but, in my opinion, Citigroup is well-positioned to weather the storm. Additionally, I believe that the bank's stock at current levels will turn out to be a great long-term buying opportunity.

The Latest

On April 15, 2020, Citigroup reported Q1 2020 results that missed on the bottom-line but that beat the consensus top-line estimate. The bank reported Q1 2020 EPS of $1.05 (missed by $0.31) on revenue of $20.73B (beat by $1.75B), which from an earnings perspective does not compare favorably to the year-ago quarter.

Source: Q1 2020 Earnings Slides

Citigroup continues to be impacted by the low interest rate environment but concerns related to how COVID-19 will potentially impact the economy was the most significant driver for the bank's Q1 2020 earnings (or lack thereof). As a direct result of the concerns, Citigroup had to materially build its reserves to deal with the potential fallout of the virus.

Source: Q1 2020 Earnings Slides

The $4.9B reserve build sounds alarming but let's also remember that all of the 6 large financial institutions - Citigroup, Bank of America (BAC), JPMorgan (JPM), Wells Fargo (WFC), Goldman Sachs (GS) and Morgan Stanley (MS) - posted total loan loss charges of ~$25.4B in

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Our President and CIO is a CPA with experience in public accounting and the financial services industry. He earned his Master of Accountancy degree in 2008 and his B.S. in Business Management in 2007. He is also a Level III CFA candidate. He has been intrigued by the market from the start. Over the years, he has learned that long-term investing is a discipline that, if followed, will help contribute to building lasting wealth. As such, most of our articles will be about the investments that we plan to hold for at least 3 to 5 years, as long as the company's story does not change. As a Seeking Alpha contributor, our main goal is to write about the companies that are key to our portfolio with the hope of promoting discussion (for or against the investment) from others within the SA community.Please visit our website for more information about W.G. Investment Research LLC.

Analyst’s Disclosure: I am/we are long C, BAC. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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