Bank of America Merrill Lynch analyst Erika Penala on Monday reiterated her "Buy" rating for Citigroup, calling the company "the one discounted, real recovery story left in U.S. banks - a recovery that we believe is clearly on track, as affirmed by 3Q12 results."
Penala's price objective for Citigroup is $45, and she expects the company to return roughly $4 billion in capital to investors during 2013.
"Over time, we expect C to return 11% of market-cap to shareholders," Penala said, adding that "an approval in Mar '13 would not only establish C as a capital return story, but could give investors confidence that there are no 'tail risk' issues -key for money center multiples to re-rate higher."
Citigroup's multiples are particularly low. The shares trade for 0.7 times their reported Sept. 30 tangible book value of $52.70, and for eight times the consensus 2013 earnings estimate of $4.64 a share, among analysts polled by Thomson Reuters. The consensus 2014 EPS estimate is $5.04.
Citi's shares have now returned 39% year-to-date, following a 44% decline during 2011.
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Written by Philip van Doorn in Jupiter, Fla.