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Citi Is a Buy
Posted by: Muhammad Bazil (IP Logged)
Date: February 28, 2013 09:19AM

Citigroup (C)'s new CEO is seemingly a good luck charm. The stock went up 14% since he took the reins. Some rumors have it that all Michael Corbat has done right so far is not be like his predecessor. Others appreciate his new leadership and the new trends. He has been given a honey-do list fit for his executive status, which according to stockholders, will justify his pay – $11.5 million in 2012.

Recently, Citi stockholders have demanded that in order to qualify for his salary, he has to return the company to not only 2006’s return rate, but also outperform four of its global competitors.

Either way, most analysts have upgraded its rating from Hold to Buy. Notably, Guggenheim and other heavy-hitter investment analysts have rated Citigroup as a "buy" stock. The yearly low was $24.61. The yearly high is $44.71. It is currently trading closer to its high. Recent earning reports for Citigroup were at $0.69 earnings per share for the quarter. This misses the estimated mark by $0.35. Still, most analysts, in addition to following suit and raising the status of the stock to buy, think that this stock will be paying an EPS of above $4 for the fiscal year. That's very good news.

We concur, here’s why:

The new trend has been headed toward streamlining. This streamlining is going to include reducing consumer banking in many countries. Citigroup currently services consumer loans in over 40 countries, but only three of those countries make up 40% of its revenue. Cutting some or all of the rest will reduce its operating expenses and boost profits.

Citigroup also recently announced that it will be both issuing and managing Best Buy Inc.(BBY)'s in-store credit cards. The card will bear the Best Buy label and will be utilized in their flagship stores. Its credit department, Citi Retail Services, will not complete the transaction until the third quarter of 2013. This will not likely affect this year's earnings. It may however, boost investor confidence. Citi Retail Services was nearly liquidated by Citigroup's previous CEO, Vikrim Pandit. Currently, Citi Retail Services issues and manages credit cards for approximately 90 million consumers. Its 2012 earnings were reported at 1.5 billion which was up from the previous year. With Citi's financial expertise, and Best Buy’s leadership in retail electronics, it will surely raise revenue for both parties.

Another issue is being backed by Citibank chairman, Michael E. O'Neill. A few years ago O'Neill wanted to weigh the options of splitting up Citigroup. These days he's not weighing that option at all. What is being weighed is a lot of regulatory uncertainty from Washington. So staying put makes more sense.

What makes this noteworthy for investors is that, in his past, O'Neill streamlined and downsized both Bank of America and Bank of Hawaii. While reorganizing without a break up is still a daunting task, Citigroup's stock has risen 77% since it announced that it will not break up. There is still a small yet very vocal group of investors who want to take this to a vote. They would like to decide whether or not Citigroup will consider splitting up. The SEC is expected to decide whether or not the proposal can be excluded.

There's still much sentiment, in the public and in the company, which expresses unfairness when the largest banks are able to secure more cash. The perception is that these large banks have greater access to the Federal Reserve as if they have a drive through window, and at a discount. Breaking them up at the smaller entities would cause them to compete and give consumers greater return. O'Neill seems to be in line with Corbat: They both want to minimize cost, reduce waste and streamline their services, but a larger restructuring plan just isn't in the works. Citibank’s stock has been weak as of late, but quarterly and year to date it is strong.

Stocks Discussed: C, BAC, BBY,
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Citi Is a Buy
Posted by: jongeorge (IP Logged)
Date: February 28, 2013 06:35PM

I fail to understand what is being conveyed in this article. Its a mishmash of consensus views from sell-side analysts, commentary on quarterly or YTD price action and a bunch of newspaper headlines that you have thrown together. I have read a few of your previous articles and I must say, if this is your idea of 'investment analysis' then PLEASE STOP contributing to Gurufocus.

Stocks Discussed: C, BAC, BBY,
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