The upgrade was due to the pace at which Citigroup is divesting non-core assets, the fast growth of its international business and the increase in capital returns shareholders.
"We now estimate a 6.75 year wind down, below our 9.25 year estimate," said Graseck in a note. "As a result, the [net present value] of non-core losses falls 69 percent to $1.8 billion from $5.8 billion."As a result, analyst also raised her price target for Citi to $6 from $5.25 and increased the earnings forecast for the bank over the next two years." Graseck added that the faster wind down of non-core assets should free up $19 billion in capital by 2014. She predicted that Citigroup should be able to complete buybacks in 2012 and return 49 percent of its current market cap to shareholders through 2014, including 9 percent through dividends. In addition, Graseck said that the 10-for-1 reverse stock split would increase the bank's investors. Many analysts such as Rochdale Securities' Richard Bove have said that the reverse stock split may decrease the amount of retail investors owning the stock along with the volume in the market. --Written by Maria Woehr in New York.
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