CFRA reiterated its Buy rating on Citi (NYSE:C), maintaining a price target of $73.00. The firm's analysis indicates that Citi is progressing well in its multiyear transformation to become a more streamlined global bank. The price target is based on a forward price-to-earnings (P/E) ratio of 10.1x, which is considered below the peer average of 11.5x.
Citi's current share price is trading at a 28% discount to its net tangible book value (NTBV) of $89.67, in contrast to its direct peers, which generally trade at a premium to NTBV. CFRA has kept its earnings per share (EPS) estimates for Citi at $6.25 for 2024 and $7.25 for 2025, which is above the consensus estimates of $5.73 and $7.01, respectively.
Citi recently reported earnings per share of $1.51, surpassing the consensus estimate of $1.32. The bank also reported a revenue beat with $20.3 billion, which is a 3% year-over-year increase when excluding divested units. However, net interest income (NII) saw a decline of 3% year-over-year.
The services sector of Citi delivered an 8% revenue growth, driven by momentum in Treasury & Trade Solutions and Securities Services. Markets revenue increased by 1%, with non-interest revenue rising by 12%, which helped to offset a 17% decline in NII. Investment banking fees surged by 44%, buoyed by a significant 75% increase in debt underwriting, a 5% rise in equity underwriting, and a 32% growth in advisory fees.
On the consumer front, U.S. Personal Banking revenues grew by 3%, with Branded Cards revenue increasing by 8% due to higher interest-earning balances. Additionally, the Wealth segment saw a 9% revenue growth, contributing to the bank's strong performance.
Major Wall Street banks, including Goldman Sachs and Bank of America, have reported significant increases in investment banking fees during the third quarter, driven by a rise in deals and corporate debt issuance. Goldman Sachs noted a 20% surge in these fees, while Bank of America saw an 18% increase. Citigroup also experienced a boost in its investment banking division, with revenues rising by 31%. Meanwhile, Citigroup reported a 9% decrease in profit for the third quarter due to an increase in reserves for potential loan defaults. Despite this, the bank's investment banking operations saw a significant revenue boost, and its services revenue grew by 8%.
Recent developments also highlight Citigroup's need for staff skill enhancement in risk, compliance, and data management roles, according to an internal assessment. The bank has been investing heavily in its transformation project to improve risk management and data controls. In addition, the state of the U.S. consumer's financial health is taking center stage as corporate earnings reports and retail sales data are expected to provide new insights into the economy's endurance.
Earnings from companies such as American Express (NYSE:AXP), Netflix (NASDAQ:NFLX), United Airlines, Procter & Gamble, and several major banks are anticipated to provide a comprehensive overview of consumer spending. The outlook for the U.S. economy avoiding a recession has strengthened, with Goldman Sachs recently reducing the likelihood of a downturn in the coming year to 15%.
InvestingPro Insights
Recent data from InvestingPro adds depth to CFRA's analysis of Citigroup. The bank's market capitalization stands at $122.18 billion, with a P/E ratio of 17.51, reflecting its current valuation. Citigroup's revenue for the last twelve months as of Q2 2024 was $69.75 billion, with an operating income margin of 18.13%, demonstrating its financial strength despite challenging market conditions.
InvestingPro Tips highlight Citigroup's position as a prominent player in the banking industry, which aligns with CFRA's positive outlook. The bank has maintained dividend payments for 14 consecutive years, offering a current dividend yield of 3.39%. This consistent dividend history may appeal to income-focused investors, complementing the potential for capital appreciation suggested by CFRA's price target.
Additionally, Citigroup has shown strong returns recently, with a 14.46% price total return over the past month and an impressive 65.94% over the last year. These figures support CFRA's bullish stance and suggest that the market is recognizing Citigroup's progress in its transformation efforts.
For investors seeking a more comprehensive analysis, InvestingPro offers 8 additional tips that could provide further insights into Citigroup's financial health and market position.
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