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

Is Citigroup Undervalued?

James Dennin, Kapitall: Citigroup has come a long way post-financial crisis, so investors should consider: is the stock undervalued?

One of the most undervalued plays on the market right now is also a household name. Citigroup (C), one of the longest-running banks in the country and the third largest asset holder in the world, is still trading around $44.33, even though it has a book value per share of $63.02. (Book value per share is essentially the money the owner of a common share would receive if the company in question were to liquidate.) 

[Read more from Kapitall: LinkedIn Wants to Sell Shares, Buy Hires]

That implies a potential upside of almost 40%, on a company that is likely to start increasing dividend payments as well. Its stock is up over 66% this year, with a number of indicators suggesting it will continue making strides towards recovery from the depths of the financial crisis.

In 2008 and 2009, Citigroup owned a lot of trouble assets, about $800 billion worth of mortgage backed-securities and home equity loans. The result was a resounding blow during the financial crisis. It was one of the banks that actually needed the bailouts provided under the Troubled Asset Relief Program (TARP). The company would have probably failed without the $45 billion in government funds.

And as a result of the program, Citigroup had to convert its preferred shares to common stock which almost tripled the number of shares outstanding, and briefly sent the stock price below a dollar. It's tried to institute buybacks for the past two years, but only recently met the new capital requirements needed to go forward.  

Many in high finance decried the new regulatory practices put in place post-financial crisis, particularly the return of the Volcker rule separating commercial and investment banks. But Citigroup seems to be one firm benefitting from the rules. It has used them to craft a strategy focusing on profitability as opposed to size, and one that keeps much more capital on hand, to allay risk and (hopefully) start returning to shareholders via buybacks and higher dividend payments. 

Bulls on Citigroup point to new management as a source of their newfound optimism. For the first time since 2010, Citigroup will be run by a banker from the inside – as opposed to a lawyer or hedge fund manager – which is already affecting the bank's strategy. The company has sold off a number of its "alternative assets" and is rumored to be looking for more buyers. It has also slimmed down, cutting over a thousand jobs worldwide. 

The company has also instituted a number of changes which it hopes will consolidate its efforts, especially abroad. Citigroup provides more banking services overseas than any of its competitors, and has worked on adapting all of its foreign offices to using the same software and banking practices. It has an international banking business which Barrons has called a "gem." More than some other banks, Citigroup looks prepared to capitalize on the faster growing emerging markets. So while there's no way to tell if the company will return to its all-time high of $591 per share, it's darkest days may be behind it. Shareholders take note. 

Click on the interactive chart to see data over time. 

Will Citigroup's growth outpace its competitors? Use the interactive list below to begin your own analysis.

1. Citigroup, Inc. ( C): Provides consumers, corporations, governments, and institutions with a range of financial products and services. Market cap at $150.82B, most recent closing price at $49.60.


1 of 2

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


Chart of I:DJI
DOW 17,798.49 -14.90 -0.08%
S&P 500 2,090.11 +1.24 0.06%
NASDAQ 5,127.5250 +11.3820 0.22%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs