Citi to Cut More, Earn More: Deutsche Bank

The analyst said that "the biggest driver of the $1.75 improvement to get to $6.00," is the elimination of "the drag from Holdings (adds about $1.25), with cost control the bulk of the rest."

"Within Holdings," O'Connor said "the largest drag remains credit costs related to US residential real estate. As housing continues to recover, we expect losses to moderate and for C to use more of the $8.5b of related loan loss reserves (nearly 10% of the mortgage book)."

O'Connor said that "the pruning of certain non US consumer businesses announced today (with likely more to come) should help simplify the C story (along with making C more efficient from a capital and expense point of view)."

Citigroup is currently paying a nominal quarterly dividend of a penny a share, and the company has not repurchased any shares this year.

After the Federal Reserve announced its methodology for the next round of bank stress tests, Barclays analyst Jason Goldberg on Nov. 12 said he expects Citigroup to raise its quarterly dividend to four cents a share following the stress tests, while gaining Fed approval to repurchase $2 billion worth of common shares, or 1.7% of shares outstanding, through the first quarter of 2014.

Citigroup's shares closed at $36.46 Wednesday, returning 39% year-to-date, following a 44% decline during 2011.

The shares trade for 0.7 times their reported Sept. 30 tangible book value of $52.70, and for eight times the consensus 2013 EPS estimate of $4.66, among analysts polled by Thomson Reuters. The consensus 2014 EPS estimate is $5.07.

C data by YCharts

Interested in more on Citigroup? See TheStreet Ratings' report card for this stock.

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-- Written by Philip van Doorn in Jupiter, Fla.

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Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.

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