Call of the Day: Citigroup

Key Concepts

• Citigroup (Citi) stock valuation
• Tangible Book Value (TBV)
• Return on Tangible Common Equity (ROTCE)
• Banamex IPO (spin-off)
• Jane Fraser's leadership as CEO
• Cost cutting and strategic realignment
• Investment Banking and Wealth Management focus
• Analyst ratings and price targets
• Bank stock performance comparison

Citigroup Stock Valuation and Analyst Ratings

• Citigroup's shares are down approximately 1% despite positive reiterations from analysts.
• Mike Mayo reiterated Citigroup as his "dominant number one pick" with an "overweight" rating and a price target of $115.
• Truist also raised its price target for Citigroup to $105.
• The stock is currently trading "a hair under tangible book value," while other banks trade at a premium to TBV (e.g., JPMorgan at 2.4x TBV, Bank of America at 1.4x TBV).
• The speaker argues that there is "no reason" for Citigroup to trade at a discount to TBV, citing the company's progress in "rightsizing the ship" over the past four years.

Citigroup's Financial Performance and Future Catalysts

• Citigroup has been "reducing costs" and "increasing return on tangible common equity (ROTCE)."
• ROTCE is expected to continue increasing into 2026.
• The upcoming Banamex IPO (spin-off) is seen as a significant catalyst for the stock.
• Citigroup is trading at a discount to forward multiples of earnings and offers a "great dividend yield."

Jane Fraser's Leadership and Strategic Changes

• Jane Fraser's appointment as CEO did not initially receive a positive market reaction due to a history of CEO turnover at Citigroup.
• Fraser has been "hiving off those sections of the bank that were not earning their cost of capital."
• She has focused on profitable areas such as "investment banking" and "wealth management."
• The Banamex spin-off is expected to move the stock to a "higher premium of tangible book value."

Comparative Bank Stock Performance

• Citigroup's stock is up 52.3% over the last 12 months, making it a top performer among big banks.
• Goldman Sachs and Morgan Stanley have also performed well, with gains of 49% each.
• Citigroup has the "best performing big bank stock in this market" year-to-date.

Talent Acquisition as a Sign of Progress

• The speaker notes that Citigroup is now attracting top talent from other firms, including Goldman Sachs.
• This is seen as a "stamp of approval" on the changes happening at the bank.
• Previously, Citigroup was perceived as a place where bankers went to retire, but now it's attracting bankers "in the prime of their career."

Conclusion

The discussion centers on the undervaluation of Citigroup's stock relative to its tangible book value and future potential. Jane Fraser's strategic initiatives, including cost-cutting, focusing on profitable business segments, and the upcoming Banamex IPO, are highlighted as key drivers for future growth and stock appreciation. The ability to attract top talent from competitors further validates the positive changes occurring within the organization. Despite some initial skepticism, Citigroup's stock performance and strategic direction suggest a promising outlook.