|Citigroup CEO Vikram S. Pandit|
NEW YORK ( TheStreet) -- For long-term investors, Citigroup ( C - Get Report) remains a beautiful play. Of course, a lot depends on how you define "long-term." With the media space dominated by screaming daily headlines and a focus on quarterly results, a securities industry focused on profitable day trading and analysts setting 12-month price targets, it's easy to forget that you might need to hold a long-term position for several years to make a solid gain.
Investors are bound to be frustrated by the 35% drop in Citigroup's share price since the shares underwent a 1-for-10 reverse split on May 6. The KBW Bank Index ( I:BKX) declined 23% over the same period. Analysts have been cutting their earnings and revenue estimates for the largest U.S. banks, projecting sharp declines in third-quarter trading and capital markets revenue, along with lower fee income as a result of the Dodd-Frank Wall Street Reform and Consumer Protection Act. But Citigroup is a much less risky play than the similarly valued Bank of America ( BAC - Get Report), which is facing an uncertain ride through the remaining mortgage mess. Right now you're looking at a golden opportunity to start a position in Citigroup's shares on the cheap, or add to a long-term position. The shares have been thrown out with the bathwater, as you'll see below. Here are 5 reasons to buy Citi now:
Bank of America was servicing $148.8 billion in one-to-four family mortgages loans (excluding home equity lines) for others that were past due over 90 or more days, plus another $22.6 billion in "early-stage delinquency" of 30 to 80 days. JPMorgan Chase ( JPM - Get Report) serviced $52.4 billion in one-to-four family mortgage loans for others that were past due 90+ days, plus another $9.0 billion past due 30 to 90 days. For Wells Fargo ( WFC - Get Report), one-to-fours serviced for others that were past due 90+ days totaled $5.9 billion, while those past due 30 to 89 days totaled $14.8 billion. For Citigroup, one-to-four family mortgages serviced for others that were past due 90 or more days totaled $1.7 billion as of June 30, while earlier-stage delinquencies within the portfolio serviced for others totaled $5.0 billion. JPMorgan and Wells Fargo trade at much higher multiples to book value than Citigroup and Bank of America, but on the mortgage front, it's obvious that Citigroup has the lowest putback risk among the big four. UBS analyst Brennan Hawken on Monday reiterated his "Buy" rating for Citi, with a $43 price target, saying that the company's fundamentals "support Citi shares trading at a premium multiple to BofA", and that the company is not "facing questions about its capital position."
would be 8% at end 2011 and would increase to 9.5% at end 2012." With a "modest" $2 billion in dividends and $4 billion in common share buybacks in 2012, the analyst estimated the "Basel III ratio would be 9% at end 2012 and would still increase to reach 9.5% in 2013."