Citigroup’s (C)
large credit card business gives it quite a bit more leverage to
consumer spending and consumer health, and that’s not a great thing
right now as Covid-19 has slammed the brakes on consumer spending.
Likewise, while Citi has a great trade finance and global cash
management franchise, that’s not so helpful when global trade grinds to a
halt.
Citi has already reserved up to close to half
of its “severely adverse” loan loss scenario, but I expect further
provisions in 2020 and I think 2021 charge-offs could be almost double
2019 levels. Even so, I expect Citi will remain solidly profitable on a
pre-provision basis and profitable on a post-provision basis, with
adequate capital to get through this crisis without halting dividends.
The Street clearly doesn’t agree and the shares trade at a substantial
discount to my fair value estimate, but I think there’s opportunity here
for more aggressive investors.
Continue here for more:
Covid-19 Hitting Citigroup's Card Business, But The Capital Looks Okay
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