Shares of Citigroup closed at $42.80 Thursday, trading for 0.8 times tangible book value, and for 8.2 times the consensus 2014 EPS estimate of $5.19. The consensus 2013 EPS estimate is $4.60.
Citigroup is one of O'Connor's "top picks" among large-cap banks, along with U.S. Bancorp. O'Connor's price target for the shares is $46, and he estimates the company will earn $4.50 a share in 2013, with EPS rising to $5.15 in 2014.
The analyst wrote on Thursday that although "capital markets revenues were a bit light [during the fourth quarter], C was the biggest share gainer in the overall global capital markets fee pool YTD 9/30 (among the 12 largest global ibanks)." O'Connor said he remained "positive" that Citigroup would continue to benefit from the reduction in excess liquidity, as well as the "reserve release still to come (including $8-9b of mortgage reserves)," additional annual cost savings of $2 billion to $4 billion in addition to the major
announced in December, "leverage to an improving U.S. housing market," and a continued build of capital.
"The stock also trades at the lowest valuation of the banks we cover on both tangible book (at 0.8x) and EPS (9x 2013E, 8x 2014E, 7x 2015E)," he said.
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