NEW YORK (
's stock price was up in early trading Monday after
added the bank to its "conviction list."
The report by Goldman analyst Richard Ramsden argues Citigroup will post a 1.2% return on assets and a 16% return on equity once it completes the run-off of Citi Holdings. At Friday's closing price of $4.07 Citigroup is at a discount to those valuations, the report states.
Ramsden sees 35% potential upside to Citigroup over the next 12 months, which would mean a stock price of $5.47. Citigroup shares were up 2.19% to $4.20 some two minutes after the open.
Further reasons for bullishness on Citi, according to the report: "putback" risk, on sloppily underwritten mortgage backed securities, "is small relative to peers."
Bank of America
have been hit hard in recent days on such concerns. Those banks' shares were all up early Monday, though by less than one percent.
Other reasons the Ramsden likes Citi include the eventual U.S. government sale of its remaining stake, an event Ramsden believes will occur in the first quarter of next year, plus $20 billion in annual "core earnings power."
In addition to discussing the bull case for Citigroup, the 38 page report reiterated Goldman's optimistic view of
, which remains on its conviction list. What both banks have in common, the report states, is "exposures to growth markets, business mix, absolute revenue generation and unlevered returns." Goldman's analysts see 31% upside on HSBC from Friday's close. The U.S.-listed shares were up slightly in early trading Monday.
Written by Dan Freed in New York
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