Sunday, July 22, 2018

Slow Progress Not Getting The Job Done For Citigroup Shares

The year-to-date performance of the banking sector hasn’t been all that impressive, as the benefits of higher rates and loan growth seem to be largely priced into market expectations and investors don’t see any particularly exciting near-term drivers. Even against that backdrop, Citigroup (NYSE:C) has continued to deliver lackluster performance, with the year-to-date performance only slightly exceeding Wells Fargo (NYSE:WFC) and trailing the likes of JPMorgan (NYSE:JPM), Bank of America (NYSE:BAC), PNC Financial Services Group (NYSE:PNC), and Capital One (NYSE:COF) (the latter arguably being its best/fairest peer comparison).

Although I think there is significant long-term value in Citi shares even if management falls short of its near-term/intermediate targets (something that the share price already seems to reflect as a given), it’s harder to make the case for near-term outperformance given the bank’s heavy reliance on cards (as opposed to business or mortgage loans) and the fact that a lot of the expense/efficiency benefits won’t show up until 2019 and 2020. Even so, I still believe patient shareholders can be rewarded here, and I think the shares are undervalued below $80.

Read more here:
Slow Progress Not Getting The Job Done For Citigroup Shares

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