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Citigroup: Back To Pre-COVID Cheap

Apr. 07, 2021 5:18 PM ETCitigroup Inc. (C)BAC, JPM, WFC40 Comments


  • Citigroup is back to pre-covid levels above $70.
  • The large bank stock survived economic shutdowns with substantial profits in 2020.
  • The bank is set to resume share buybacks at a substantial clip in the second half of 2021.
  • The stock still trades below TBV and trades below 9x forward EPS estimates.
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Photo by Roman Tiraspolsky/iStock Editorial via Getty Images

Like a lot of financials, Citigroup (NYSE:C) is back close to where the stock traded pre-COVID-19 lockdowns. The large bank sector overcame the economic shutdowns with limited impacts, highlighting these banks aren't the same that were crushed during the financial crisis. My

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This article was written by

Stone Fox Capital profile picture

Stone Fox Capital (aka Mark Holder) is a CPA with degrees in Accounting and Finance. He is also Series 65 licensed and has 30 years of investing experience, including 10 years as a portfolio manager.

Mark leads the investing group Out Fox The Street where he shares stock picks and deep research to help readers uncover potential multibaggers while managing portfolio risk via diversification. Features include various model portfolios, stock picks with identifiable catalysts, daily updates, real-time alerts, and access to community chat and direct chat with Mark for questions. Learn more.

Analyst’s Disclosure: I am/we are long C, WFC. 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.

The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities. Before buying or selling any stock, you should do your own research and reach your own conclusion or consult a financial advisor. Investing includes risks, including loss of principal.

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Comments (40)

Stone Fox Capital profile picture
Not the best results, but $C still on track for strong capital returns.

-As of Q1 2021, Citi's common equity tier 1 capital ratio was 11.8% under both approaches. Based on the updated regulatory capital requirements, Citi said it continues to believe that a targeted CET1 capital ratio of ~11.5% represents the amount necessary to prudently operate and invest in Citi’s franchise.
-"We look forward to continuing with our planned capital actions, including common dividends of at least $0.51 per share, and to continuing share repurchases, which are particularly attractive when our stock price is below tangible book value per share," said Citi CEO Jane Fraser.
21 Apr. 2021
More announcements coming for C according to the CEO. Could they divest Mexico? Also the announced divestitures are $7b of tangible book - keep an eye on sale prices achieved. Anything more than $7b will be straight value add
Stone Fox Capital profile picture
Big quarter from $C

-Q1 EPS of $3.62 vs. consensus of $2.53; compares with $2.08 in Q4 2020 and $1.06 a year ago.
GR Value profile picture
@Stone Fox Capital I believe the $3.62 contained extremely high levels of IPO activity and a huge loan provision reversal. KWB was saying GS had 300% IPO/offering activity over 2019 and looking back five years this (quarter) is inflated by more than double average activity. In other words, you can't extrapolate or repeat this level of revenue.

Net interest margin fell to 1.95% and while the 10 year is rising, I don't see any short term yields rising that they could benefit from. C allocated it's capital in a very precarious way. It focused most of it's 669B in loans in credit cards (high yields but waning over time) and moderate rate corporate loans.

It did not focus on mortgages (Wells) or long term instruments in bulk. Citi does not have a large retail banking division that it can draw vast fees or transaction amounts from. Rather it kept around 1 trillion liquid which is now (1/3rd each) yielding 0.19%, 0.44% and 1.5% respectively.

Citi could only benefit with a rapid increase in short term yields which is in no way happening in the next 2 years let alone my lifetime. Put simply, their assets underperform and have terrible allocation. Those that are high performance will wane over time or are inflated from high IPO fees. Those that have low current performance have literally no prospects of increases.

The other banks that have committed loans also have risk that eventually individuals with 0-0.5% yields pull their deposits which those banks rely on for 3-5% loans. C has almost no risk (to margins) because while it has a vast 1.3 trillion in deposits, it kept 600-900 billion in liquid accounts that yield next to nothing. But still, any deposit yanking would lower assets and is generally frowned upon.
Stone Fox Capital profile picture
@GR Value
Not sure why you think short term yields aren't going to rise. They are far too low for a booming economy.
jd99 profile picture
Agree that the buybacks alone mean this is a buy but for extra returns a lot depends on Fraser - what is your view on her ability to deliver for shareholders?
Orangejulius profile picture
Unknown, but she has been with Citi since 2004 and worked her way up to CEO, so she clearly knows the business. She worked for GS's London M&A division before that, so it looks like she has a well rounded grasp of both investment banking and consumer banking. Overall, she appears to be a safe pick that will hopefully bring stability to the bank. That's probably a good thing.

My only worry is that she may be too traditionally rooted in banks to miss some of the big changes currently happening between fintech and crypto. While I'm hardly a crypto evangelist, some of the tech and efficiencies being introduced by stellar and ripple warrant serious considerations with their ability to virtually eliminate forex fees and provide safe, near-instant money transfers. I suspect the banking landscape will be much different in 5-10 years, with larger changes than we've seen in 50 years.
Stone Fox Capital profile picture
As with any new CEO, she is a wild card.
Citi sucks:
$5 2008, $7@ today, remember the 10 × reverse split.
@Pinole10 ,

It's 2021. Time for you to move on.
@dlhatheway True Dat. :)
Stone Fox Capital profile picture
Investing is about the future, not the past.
I bought some at 45 and very happy so far...
If it ever will go to 90 ( looks like ) I sell half of this position and lets play with housemoney...
And some Dividends between are the ice on the cake..

Picked also some WFC at 24 and JPM at 90 and all looks good so far.

Greetings from Germany
vitullijoe profile picture
what is the upside in 2/3 years
08 Apr. 2021
@vitullijoe without any revenue growth C should trade at $90-100 in 2 years due to buy backs. Throw in moderate growth or divestures and C could easily top $100
bengalesq profile picture
Looking for August cheap. Call me when....
Bought and sold. Willing to buy again but not here.
Stone Fox Capital profile picture
August? Why not November cheap when the stock dipped to nearly $40?
@Stone Fox Capital That's when I bought in that $40's level.But only bought 5 average at 42.00. :( Already own BAC 100 at 11.15 Dec of 2012 and JPM 50 at 60.40 June of 2016.
bengalesq profile picture
@Stone Fox Capital Don't think we will see November again. August is possible.
Buyandhold 2012 profile picture
Citigroup is still a buy.
C below $50, yes, maybe nibble.

C above $50, hold, and pray.

C how simple that strategy is ;-/ ?

The best of fortune to us all

(P.S. Don't forget to DRIP this if holding in a divvy port)
Stone Fox Capital profile picture
@D. Rider
Why do you have to pray about a stock trading below TBV?
Stone Fox Capital profile picture
@Siyu LI
Think most of the best stocks are run by ruthless management teams so not sure about good karma being the key.
Meanwhile you missed a great ride with vz
sagalat profile picture
@jimoc -- Boring CHART unless you go back to May 2010.....
This is just a suspicion, but I believe it. Since the passage of national banking Citi hasn’t expanded in the US like the other mega banks have. It’s still a true international bank. Mexico supplies, what, 1/4 to 1/3 of its profits? It’s so vast that the market wonders when the next bomb will blow in some country with no warning. The $900m boo-boo with the Revlon account isn’t a stand alone event if you track Citi.
Rex Rode profile picture
I was happy to ride this up from $43 (Oct.) to $71 (plus dividends.) I sold in early March. The confirmation of these share buybacks definitely has me interested again. I believe Jane Fraser and her team will do well and expect this stock to narrow the gap in their peer group. It would be nice to pick this up in the high 60's between now and earnings. I think they will produce some great results in the future. It's plausible to make a case for C hitting $100 within 6 quarters, and with the dividend, not a bad play.
Stone Fox Capital profile picture
@Rex Rode
No doubt, picking $C in the $60s would be awesome. Just not sure how much one can count on it when you are now buying alongside the company again.
Oh Citi is great, not.......
Citi's reverse split over 10 years ago put the stock at $50 a share to $72 today. Real value is $5 a share to $7.20.
Good Luck to all.........
@Pinole10 focusing on something 12 years ago and ignoring the present/future is a great investment strategy, not....
Rex Rode profile picture
It still hurts doesn't it?
@Rex Rode it f”n hurts! Lost trust in C. Revlon products anyone?
spinrbait profile picture
Everything written sounds great. But why is the stock not trading higher? Its not like this is all a secret. I was expecting close to 80 a share, or even better by now.
Rex Rode profile picture
@spinrbait Well it's gone from $40 to a high of $76 in less than 6 months....was that not good enough for U?
spinrbait profile picture
@Rex Rode JPM BAC TFC are all above their highs before we even heard of covid. so no, its not high enough for me. its under performed every bank on my bank list.
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