This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

As Citi Gets Boring, Shareholders Get Excited

Citi has built a significant amount of capital and now boasts a Basel III Tier I Common Capital of 9.3%, putting it ahead of JPMorgan Chase's (JPM - Get Report) capital ratio of 8.9%. Management expects to finish the year with the capital ratio at 10% or more, giving it a buffer over the proposed regulatory minimum of 9.5% for too-big-to-fail banks.

These are all important elements to Citi's earnings recovery story, so it is natural that investors and analysts are welcoming the results.

But the key is for the bank to keep delivering on its promise.

"Citigroup's stock is still a show me stock, in our view," RBC Capital analyst Gerard Cassidy wrote [emphasis his]. "As the result of the company's track record over the last five years, investors are demanding to see the results rather than give management the benefit of doubt that the results will materialize before they purchase the stock. Therefore, Citi shares will likely remain volatile for as long as Citi Holdings remains a sizable influence. We believe any sale or acceleration of disposals from Citi Holdings will leave little doubt in investors' minds that its recovery is sustainable. The more boring the company becomes the better the stock valuation, in our view."

Oppenheimer's Kotowksi echoes that view, noting that while Citi's topline growth in most segments was nothing to write home about, it exhibited tremendous stability in the first quarter. "Given that Citi's greatest weakness in recent years has been adverse surprises, we'll take stability[over growth]. With the stock at 86% of tangible book value, we think that stability is all you need to get to TBV. Over time, stability leads to more capital for either buybacks or business investment that can drive it higher from there."

Joshua Siegel, CEO of Stonecastle Partners, which is actively invested in community banks, says Citigroup has a long road ahead of it, but has the right management in place to implement its turnaround.

"Citigroup is Titanic times 1000. It is very hard to turn that ship. The captain has turned the wheel but the ship won't turn on a dime," he said in an interview with TheStreet last week.
2 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
C $45.58 -2.40%
JPM $62.55 -1.90%
WFC $50.01 -1.10%
AAPL $95.18 1.64%
FB $117.44 -0.95%


Chart of I:DJI
DOW 17,750.91 -140.25 -0.78%
S&P 500 2,063.37 -18.06 -0.87%
NASDAQ 4,763.2240 -54.37 -1.13%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs