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BofA acknowledges Citigroup's decision to de-risk the bank, keeps stock buy-rated

EditorIsmeta Mujdragic
Published 06/06/2024, 02:19 PM
© Reuters.

On Thursday, BofA Securities maintained a positive outlook on Citigroup Inc. (NYSE:C), reiterating a Buy rating and a $75.00 price target on the stock. The endorsement comes amid strategic changes implemented by the bank's CEO, Jane Fraser, aimed at streamlining operations and making selective investments.

The analyst from BofA Securities highlighted the bank's ongoing efforts to de-risk and simplify its structure, which are expected to result in a leaner Citigroup. The bank's strategic choices are forecasted to achieve a Return on Tangible Common Equity (ROTCE) of 10% by the fiscal year 2026, supporting the $75 price objective, which equates to 0.8 times the projected tangible book value per share at the end of 2024.

The firm's increased confidence in Citigroup's management to meet its goals and the clearer outlook on the bank's competitive standing in its various business segments could potentially accelerate a revaluation of the bank's tangible book value. If this re-rating occurs more swiftly, it might indicate a 60% upside by the end of 2025.

Several significant events are on the horizon for Citigroup, which could provide further insights into the bank's operations and financial health. These include an update on the Wealth business scheduled for June 12, 2024, a Services investor day on June 18, 2024, and stress test results expected in the week of June 24, 2024. The reiterated Buy rating reflects anticipation of these updates and the bank's progress towards its stated objectives.

In other recent news, Citigroup has seen a series of significant events. Former JPMorgan executive, Viswas Raghavan, has taken the reins as the new head of banking at Citigroup, a move that has been welcomed by CEO Jane Fraser and analysts alike. The bank's first-quarter investment banking revenue was reported at $903 million, and the company expects a market share growth of up to 30% in 2024.

In addition to leadership changes, Citigroup has been the subject of analyst attention. The bank's first-quarter earnings for 2024 exceeded expectations with core EPS reported at $1.76, outperforming consensus estimates by 34%. Analysts from firms such as Goldman Sachs and CFRA have given positive ratings and raised price targets, reflecting confidence in the bank's strategic initiatives and potential for growth.

Citigroup has also reinstated full-time office work for about 600 U.S. employees, marking a shift from its previous remote work policy. However, the majority of its workforce will continue to maintain their hybrid schedules.

In a less positive development, former Citigroup managing director, Kathleen Martin, has filed a lawsuit against the bank and its COO, Anand Selva, alleging wrongful termination. Martin claims she was dismissed for refusing to provide regulators with misleading information. Citigroup has refuted the allegations and plans to contest the lawsuit vigorously.

InvestingPro Insights

As Citigroup Inc. (NYSE:C) navigates through strategic changes, real-time data from InvestingPro offers additional insights into the company's financial health. With a market capitalization of $117.65 billion and a P/E ratio standing at 17.9, Citigroup appears to be maintaining a solid position within the Banks industry. Notably, the bank's revenue over the last twelve months as of Q1 2024 was reported at $69.64 billion, despite a slight downturn of -2.4% in revenue growth during the same period.

An InvestingPro Tip indicates that Citigroup is a prominent player in the Banks industry, which aligns with the bank's efforts to de-risk and streamline operations. Additionally, the bank has been able to maintain dividend payments for 14 consecutive years, with a current dividend yield of 3.43%, showcasing its commitment to shareholder returns. This is particularly relevant considering the bank's strategic goals and the potential for a revaluation of its tangible book value as highlighted by the BofA Securities analyst.

Investors looking for comprehensive analysis and additional InvestingPro Tips on Citigroup can explore further with a subscription. There are more tips available, providing deeper insights into the company's performance and prospects. Use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, unlocking valuable investment intelligence.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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