Entering text into the input field will update the search result below

Citigroup's Strategic Direction Finally Makes Sense

May 03, 2021 9:12 AM ETCitigroup Inc. (C)JPM14 Comments
IP Banking Research profile picture
IP Banking Research


  • Citi's new CEO is not wasting any time in restructuring the firm.
  • The strategic direction appears sound and confidence is building around the execution.
  • The disposal of the Asian and EMEA consumer divisions has been announced and there is more to come.
  • Is Citigroup finally investible?

Protests Against Police Brutality Over Death Of George Floyd Continue In NYC
Photo by John Moore/Getty Images News via Getty Images

As articulated in my prior Seeking Alpha articles (see one such example here), Citigroup (NYSE:C) has been a trading position for me and not a long-term investment. My

This article was written by

IP Banking Research profile picture
Independent banking research focuses on financials, deep value, special situations, and financial arbitrage. Agnostic and apolitical approach for scouring the earth for durable and uncorrelated cashflows that work well in both inflationary and deflationary settings.See my tipranks profile below:https://www.tipranks.com/bloggers/ip-banking-researchTo benefit from independent insights and quality analysis from a banking insider - subscribe as a "real-time" follower above.

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

Recommended For You

Comments (14)

I spent 16 years with Citi, all in the U S, leaving in 1997. It's tragic what previous management teams (Reed, Weill, Prince, etc.) did to this company. I remember the stock at around $45 or so in 2007. and analysts having a price target of $75. So in a couple of years it went to $1. Tragic, but not unlike some other companies that were run into the ground. Think GE.

Good narrative by this author. I think pretty much right on.
looks cheap however when will the payout ratio increase? yield of 3% is still not enticing for financials.
IP Banking Research profile picture
@halba12 I think with the larges banks, one should expect a dividend payout ratio of around 30%. The rest is paid out in buybacks. If you believe Citi is cheap currently at around tangible book value compared to other US banks that trade at 1.5x to 2.3x tbv, then buybacks make sense.
There are a number of reasons, primarily the Fed’s soft guidance. When crisis/recession happen (ie see recent pandemic), the banks can switch off the buybacks temporarily but keep the dividend going. In other words, the dividends (on the face of it) are sustainable throughout the economic cycle. Longer term, all else being equal, one would expect the dividend to grow CAGR at 10-15 percent (mix of lower share count and profit growth as well as utilisation of DTA).
Sceptical of growth of US market other than the large urban markets currently in. No interest expressed internally, in fact the complete opposite. BanaMax seems to be a sacred cow and while the sale makes business sense, I see Citi going long term.
The elephant in the room is the needed systemic upgrades. Great amounts of money and time spent over the years but little to no improvement at an operational level. I see Jane as the leader capable of completing the needed upgrades and getting off the merry go round. Fingers crossed.
Emerald profile picture
@IP Banking Research, well stated article.
sditulli profile picture
Kind of remains me of Microsoft at 25. Cheap enough legacy earnings to hold while it restructured and rerates
I am getting quite excited, there is now a clear pathway to a substantial re-rating of C’s valuation. I think the regulatory issues go away in a couple of years with the resulting investment only strengthening C’s market position and cost savings. Throw in the strategic divestures and potential to sell Mexico well above book, all bodes well for C.

Having said all that, C is probably not going to re-rate higher until tangible progress is made in its returns. But that is why I am invested now.
willpetty profile picture
Like simple strategies - thanks for yours.
If Citi smoothly resolves the consent orders, what bank or banks do you think it should purchase to grow? A recent Reuters article suggested U.S. Bancorp. Here’s the link: www.reuters.com/...

I definitely think an acquisition makes the most sense, but what is your opinion on the super regional banks available to purchase? I think Truist has the best presence in the fastest growing markets in the country, which makes it a good option to buy as well.
Siyu LI profile picture
@Inquisition I am sure IP will give a more thoughtful reply. my take is Citi is too cheap (trade at ~1xTBV), and not in a decent shape yet (e.g. look at JPM) to even thinking about acquiring other banks.
IP Banking Research profile picture
@Inquisition @Siyu LI Citi has to first dispose of Mexico and fix Consent Orders issues before regulators will entertain a sizeable acquisition.
It is at least couple of years away but the steps along the way are really important.
In terms of banks to buy, deposits franchise are prob most complimentary. I don’t think Citi needs to double down on credit cards either.
Deposits and wealth management are prob the areas to focus on and strengthen further. Shrink first than grow is the right strategy
Jeff Anderson profile picture
Nice article!

Agree with you that "Citi does not generate the same risk-adjusted returns as its U.S. peers. The only way to solve this is by growing the U.S. presence in a capital-light and accretive way" and that selling Mexico, resolving the consent order and wise US acquisitions play significant parts in correcting that.
Siyu LI profile picture
Nice take, I agree. On Mexico, I think Fraser's first move is absolutely right, there is no reason to bundle it together with a bunch of Asian branches for a fire sale. It is a bigger story, worth a lot more money, deserves a spotlight sale down the road, at least that's what I hope.

btw, do you receive notification on this mention?


I noticed @ is not working too well now.
IP Banking Research profile picture
@Siyu LI have not received the notification ;)
Disagree with this article? Submit your own. To report a factual error in this article, . Your feedback matters to us!
To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.