Bank of America Merrill Lynch analyst Erika Najarian rates Citigroup a "buy," with a $58 price target, implying 19% upside for the shares over the next 12 months. "We believe C is one of the more misunderstood banks in that investors view outsized risk in its international operations, but overlook the company's EPS leverage to a US housing recovery," she wrote in a client note on Thursday.
Citigroup is unique among the largest U.S. banks, in that 57% of the company's third-quarter revenue and 63% of its operating profits were derived from operations outside the United States.
Najarian thinks "emerging markets (EM) headline risk" is driving the current discount in Citi's shares. "As such, we think C stock could re-rate to TBV if the next several quarters contain no EM credit quality shocks - especially in light of strong capitalization levels," she wrote.
Goldman Sachs (GS) closed at $163.52 Thursday and traded for 1.1 times its reported Sept 30 book value of $143.86 a share. The stock trades for 10.6 times the consensus 2014 EPS estimate of $15.43.Deutsche Bank analyst Matt O'Connor continues to prefer market sensitive banks over regional and asset-sensitive banks, and in a note to clients on Thursday wrote that "4Q capital markets revenues are off to a good start." The record closing for the Dow Jones Industrial Average
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