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TheStreet Open House

10 Cheapest Bank Stocks to Forward Earnings (Update 3)

7. Citigroup

C Chart C data by YCharts

Shares of Citigroup (C) closed at $46.97 Friday, returning 19% this year, following a 51% return during 2012. The shares trade for 0.9 times tangible book value, and for 8.7 times the consensus 2014 EPS estimate of $5.39. The consensus 2013 EPS estimate is $4.64.

Investors reacted very favorably after Citigroup on April 15 reported first-quarter earnings of $3.81 billion, or $1.23 a share, compared to earnings of $1.2 billion, or 38 cents a share, in the fourth quarter, and $2.93 billion, or 95 cents a share, in the first quarter of 2012. The fourth-quarter results had included $1 billion in pretax expenses tied to the company's cost-cutting initiative announced in December.

Please see TheStreet's earnings coverage for full details on Citi's first-quarter results.

KBW analyst Frederick Cannon rates Citigroup "outperform," with a price target of $55, and said in note to clients on April 28 that despite being "the most global of the largest U.S. banks," the company could also "be one of the biggest beneficiaries of rising U.S. home prices this year."

Within Citi Holdings -- into which noncore assets have been placed to run off, as part of Citigroup's "good bank/bad bank" long-term strategy -- there were $98.3 billion in total U.S. loans as of March 31, including $86.1 billion residential mortgage loans.

With only residential mortgage loans making up just 7% of Citigroup's total assets, Citigroup "is least affected by reduced mortgage banking fees," Cannon wrote. But when analyzing the effect on 2013 earnings estimates for six of the largest U.S. banks on a 20% decline in mortgage origination fees, a 20% reduction in net loan charge-offs, along with a 10% reduction in expenses on nonperforming assets, Cannon determined that Citigroup would see an 8% boost to earnings. This was second only to Bank of America, and ahead of the projected benefit of rising home prices to PNC Financial Services Group (PNC), JPMorgan Chase, Wells Fargo, and U.S Bancorp (USB).

Cannon estimates Citigroup will earn $4.75 a share this year, with earnings increasing to $5.90 a share in 2014.

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

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