Wall Street is getting antsy waiting for Citigroup ( C) to turn itself around. Three years after taking over for the legendary wheeler-dealer Sandy Weill, CEO Chuck Prince has come under pressure from restive shareholders. Until a rumor-fueled rally late last year, shares of the nation's largest bank had fallen far behind archrivals Bank of America ( BAC) and JPMorgan Chase ( JPM), as Citi's slow growth and sagging domestic operations sent fans packing. Prince cooled his critics briefly in December by siccing head of investment banking Robert Druskin on the bank's runaway expenses. But with fourth-quarter earnings looming Friday morning, investors are eager to see signs that Prince has bigger plans. "Citi said, 'We see more opportunity pursuing stronger growth abroad,' but with pursuing that stronger growth comes risk," says Anton Schutz, president of Mendon Capital Advisors and the fund manager to Burnham Financial Services fund. He doesn't own Citi. "The Street is getting a little impatient." Druskin's hiring came as investors speculated that Citi might either split its retail and wholesale banking operations, or purchase a large U.S. banking company to beef up its domestic consumer business. Instead the company sees expansion outside of the U.S. as the key to improving it stock price. Last quarter Citi announced an assortment of smaller international acquisitions. At the same time, Prince pledged to cut investment spending in half this year to hold down costs.
"I think he is doing the right things," says Jeff Harte, an analyst at Sandler O'Neill. "He walked into a tough situation. These things had to be done and they're expensive and time-consuming and the yield curve happened against them at possibly the worst time. "One of the things people don't like about Citi is that it's so big and so internationally
focused that there tends to be a lot of noise every quarter," Harte adds. "Can they grow that bottom line enough for people to compensate for that noise? I think they will be able to." One area that will boost the bank's earnings is its corporate and investment banking. Like the big brokerages, Citi too should show strong revenue from M&A advisory, equity and debt financing, and trading in the fourth quarter. Analysts are expecting the company to earn $1.03 per share in the fourth quarter, on $22.4 billion of revenue. And when comparing the conglomerate to, say BofA, Citi's problems make it the better investment opportunity, says Richard Bove, an analyst at Punk Ziegel. "It seems unlikely that Bank of America can improve its outlook," he writes in a recent note. "The company is at the top of its game. Citigroup is well below its earnings potential. Therefore Citigroup offers the possibility of faster growth as it returns to a more normal level of earnings."