On Friday, CFRA, a prominent financial research firm, upgraded the stock price target for Citigroup Inc (NYSE:C) to $71.00 from the previous target of $67.00, while reiterating a Buy rating on the stock. The firm's decision is grounded in an expanded price-to-earnings (P/E) multiple of 11.5 times their 2024 earnings per share (EPS) estimate. This valuation is still below the 12.5 times average P/E multiple of Citigroup's peers.
The rationale behind the raised price target is Citigroup's trading position below its net tangible book value (NTBV), which stands at $81.65. Currently, Citigroup's shares are trading at a 23% discount to NTBV. CFRA has maintained its EPS forecast at $6.20 for 2024 and $7.25 for 2025. The firm's positive outlook is partly due to Citigroup's ongoing strategic realignment and potential for growth in institutional markets.
Citigroup has been recognized for its strong franchises in corporate treasury services, technology platforms, and its expanding global wealth division. CFRA is optimistic about Citigroup's ability to execute its new strategy and narrow the price to NTBV gap. This optimism is supported by the Services segment's performance, which includes treasury and trade solutions that reported an 8% fee revenue growth in the first quarter compared to the same period last year.
Despite a modest 1% year-over-year increase in net interest income in the first quarter, CFRA notes that Citigroup's management is actively streamlining the bank. This includes plans to exit consumer banking in Mexico by 2025 and the sale of 14 non-U.S. consumer banks. These strategic moves are expected to further position Citigroup favorably for future growth.
In other recent news, Citigroup Inc is facing multiple developments. The bank has been fined $136 million by the Federal Reserve and the Office of the Comptroller of the Currency (OCC) for non-compliance with a 2020 enforcement action. Despite this, Piper Sandler maintains an Overweight rating on Citigroup's stock.
The bank also seeks to dismiss a racial discrimination lawsuit related to its ATM fee policies. The plaintiffs argue that Citigroup's policy of waiving out-of-network ATM fees for customers of minority-owned banks is discriminatory. Citigroup defends that its program aims to improve banking access in communities of color.
Recent developments also include Citigroup's reduction of its indicative Stress Capital Buffer (SCB) requirement to 4.1%, and plans to raise its quarterly common stock dividend from $0.53 to $0.56 per share, starting in the third quarter of 2024. However, the bank has cautioned that these projections are subject to change due to various factors.
Furthermore, Citigroup confirmed the departure of Peter Cai, the bank's head of risk data, amidst a significant reorganization effort. This comes as regulators express concern over Citigroup's 'living will', a plan outlining its bankruptcy management strategy.
Finally, Citigroup, along with JPMorgan and HSBC, is set to earn significant fees from Hyundai Motor (OTC:HYMTF)'s upcoming initial public offering (IPO) in India. These are among the recent developments that investors should consider.
InvestingPro Insights
The recent upgrade by CFRA on Citigroup's price target to $71.00 underscores the potential undervaluation of the bank's stock. In line with this, InvestingPro data reveals a trailing twelve-month P/E ratio of 16.6, which is below the industry average, suggesting room for price growth as Citigroup aligns with sector valuations. Additionally, Citigroup has demonstrated a strong commitment to shareholder returns, maintaining dividend payments for 14 consecutive years, with a current yield of 3.23%. This dedication to dividends is an attractive feature for income-focused investors.
Moreover, Citigroup's significant price appreciation over the last six months, with a 27.16% total return, reflects investor confidence in the company's strategic initiatives and market position as a prominent player in the Banks industry. While revenue has seen a slight decline over the last twelve months, the company's operational efficiency is evident through an operating income margin of 18.0%, which is a robust indicator of its profitability.
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