Friday, December 21, 2018

Citi Getting No Love As Macro Risks Mount

Liking Citigroup (C) has never been a particularly popular call, and to be honest, the skeptics have been right about it this year, as Citi has lagged other large banks like JPMorgan (JPM), Bank of America (BAC), Wells Fargo (WFC), and PNC (PNC) this year, and particularly so over the last three months. With weak pretax margins, some global macro risk, rising credit risk, and ongoing struggles with efficiency, I suppose I can understand why investors wouldn’t be so eager to own this name going into what could be a more challenging 2019.

Defending Citi isn’t really high on my to-do list, as I don’t think it’s a particularly well-run bank. That said, I find it interesting that Citi is valued the way it is, as it seems like the market is much, much less forgiving to under-earning banks than it has been in the past. A long-term earnings growth rate of just 4% could support a fair value in the $70’s, but it is clear to me that Citi has a lot of work to do to both improve its financial performance and its perception.

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Citi Getting No Love As Macro Risks Mount

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