Citigroup Appears Ready And Willing To Take A Bigger Swing At Lasting Change

 

The long and painful wait for real progress at Citigroup (C) goes on, and with it, the shares of this under-earning large bank continue to lag. Citigroup shares are down another 10% from the time of my last update, making this a notable laggard relative to other large banks (by around 20% or so). Simply put, there's just no real conviction among investors that Citi management is up to the task of fixing what ails this bank and that these latest strategic efforts will just lead to more of the same - weak single-digit ROTCEs that don't come close to earning back the cost of equity.

I would argue that Citi's announcement that it is exiting Banamex (a sale or IPO) is a sign that management is serious about finding a new path for the bank, as this was long viewed as an untouchable crown jewel asset. Still, the Street is going to need to hear something beyond just "more of the same, only better" at the upcoming March 2 Investor Day, and even if they do, management's ability to execute on a more dynamic plan (and the time it will take to do so) will still be in question.

I've been bullish on Citi for some time now, largely on the basis of the low expectations built into the share price, and that call hasn't worked as the Street has been understandably frustrated as banks like Bank of America (BAC) and JPMorgan (JPM) have marched on well ahead of Citi. I still think there is more potential here than is reflected in the share price, but whether that potential can ever be realized is absolutely a fair question.

 

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Citigroup Appears Ready And Willing To Take A Bigger Swing At Lasting Change