Citigroup (NYSE:C) remains a frustrating stock, with the shares still continuing to lag the group of larger U.S. banks on a year-to-date basis by about 17 points. The new CEO has laid out what I believe to be an attractive medium-term set of corporate priorities, and while achieving these targets will require consistently good execution, I don’t think they’re excessively ambitious.
I expect Citi to achieve a 10% or better return on tangible common equity (or ROTCE) in 2023, and I likewise believe the shares are still meaningfully undervalued on that basis and on longer-term discount core earnings as well. Long-term core earnings growth of just 2% to 3% can support a fair value above $90, and I believe the CEO understands the steps that the bank needs to take to become more profitable and more competitive for the long term.
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