) -- The pain for the employees of


(C) - Get Citigroup Inc. Report

will be gravy for Citigroup's shareholders.

Deutsche Bank analyst Matt O'Connor late on Wednesday said that Citigroup was "on the path to $6.00 of EPS power," underlying a significant opportunity for long-term investors.

Citi's shares rose 6% on Wednesday, after the company


that it would lay off 11,000 employees and close 84 branches, in order to reduce its expenses in 2013 by $900 million, with revenue declining by an estimated $300 million. Citigroup said it would take a fourth-quarter charge of $1 billion, with another $100 million in charges during the first half of 2013.

The company said that its annual expense savings from the cuts would increase to $1.1 billion in 2014.

Speaking at the Goldman Sachs Financial Services Conference on Wednesday, Citi CFO John Gerspach said the company was continuing "to simplify our business model and focus our resources on our core Citicorp franchise while winding down Citi Holdings in an economically rational manner."

Citigroup placed noncore runoff assets within Citi Holdings as part of former CEO Vikram Pandit's long-term "good bank/bad bank" strategy to right-size the company's balance sheet. The company's new CEO Michael Corbat is accelerating that strategy.

Gerspach said that Citigroup was "disposing of the assets as quickly as we can in an economically rational manner," and that "the optimization of Citicorp and the wind down of Citi Holdings represent a significant opportunity to improve equity returns over time as we build sustainable earnings in Citicorp, reduce the drag from Citi Holdings and generate considerable excess capital for eventual return to our shareholders."

When asked if additional restructuring announcements were coming in the wake of Corbat's review of the company's operations, Gerspach said "this is a fairly comprehensive initial foray," but that the Citi "will constantly seek to find new areas to improve efficiencies," and that Wednesday's actions were "part of a continuum."

O'Connor rates Citigroup a "Buy," with a $40 price target, estimating that the company's earnings will rise from $4.10 a share this year to $4.61 in 2013, with EPS climbing to $5.14 in 2013 and $6.04 in 2015. When discussing the cost savings, O'Connor said there was "more to come."

The analyst said that "the biggest driver of the $1.75 improvement to get to $6.00," is the elimination of "the drag from Holdings (adds about $1.25), with cost control the bulk of the rest."

"Within Holdings," O'Connor said "the largest drag remains credit costs related to US residential real estate. As housing continues to recover, we expect losses to moderate and for C to use more of the $8.5b of related loan loss reserves (nearly 10% of the mortgage book)."

O'Connor said that "the pruning of certain non US consumer businesses announced today (with likely more to come) should help simplify the C story (along with making C more efficient from a capital and expense point of view)."

Citigroup is currently paying a nominal quarterly dividend of a penny a share, and the company has not repurchased any shares this year.

After the

Federal Reserve

TheStreet Recommends

announced its methodology for the next round of bank

stress tests

, Barclays analyst Jason Goldberg on Nov. 12 said he expects Citigroup to raise its quarterly dividend to four cents a share following the stress tests, while gaining Fed approval to repurchase $2 billion worth of common shares, or 1.7% of shares outstanding, through the first quarter of 2014.

Citigroup's shares closed at $36.46 Wednesday, returning 39% year-to-date, following a 44% decline during 2011.

The shares trade for 0.7 times their reported Sept. 30 tangible book value of $52.70, and for eight times the consensus 2013 EPS estimate of $4.66, among analysts polled by Thomson Reuters. The consensus 2014 EPS estimate is $5.07.

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


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Written by Philip van Doorn in Jupiter, Fla.

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Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.