Citigroup Shares Should be Avoided: Analyst

Article updated to include accurate trading price.

NEW YORK (TheStreet) -- Investors should avoid Citigroup's (C) shares following a 1-for-10 reverse stock split because access to the stock to a larger group of shareholders could have a short-term, negative impact, says David Hilder, analyst at Susquehanna Financial Group.

Hilder is giving Citigroup a neutral rating with a price target of $45.00.

"Citigroup is clearly taking cosmetic steps to look more like a "normal" bank stock and less like a slim survivor of the financial crisis," said Hilder in a note. "By getting the stock price to the $45 range, C hopes to open the door for funds that may not be able to buy stocks priced under $5 a share. Similarly, a new quarterly dividend of $0.01 per share will provide a dividend yield of less than 10 bps but will allow funds that cannot buy non-dividend-paying stocks to buy C."

Hilder adds that the shares will be less attractive to high-frequency traders because of the higher pricing and smaller rebates. He says shares will be easier to short.

"We would avoid C shares as we see greater upside over the next 12 months in other bank stocks, including Bank of America (BAC), Wells Fargo (WFC), Bank of New York Mellon (BK), State Street (STT) and Goldman Sachs (GS)," said Hilder in a note.

In pre-market trading the shares were at $44.89.

Not all analysts feel the same way. Last week Morgan Stanley (MS) analyst Betsy Graseck upgraded Citigroup to "overweight" from "equal-weight" and gave the bank a $6 price target.

--Written by Maria Woehr in New York.



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