Hawken downgraded Citigroup ( C) from a "Buy" rating to a Neutral rating, while leaving his price target for the shares unchanged at $36.00.

Citi's shares closed at $33.94 Wednesday, returning 30% year-to-date, following a 44% decline during 2011. The shares trade for 0.8 times their reported June 30 tangible book value of $51.81, and for 7.5 times the consensus 2013 EPS estimate of $4.53 a share, among analysts polled by Thomson Reuters.

The company announced on Sept. 11 that it would record a pretax write-down in the third quarter of $4.7 billion, or $2.9 billion after tax, after the company and Morgan Stanley agreed upon a valuation for the Morgan Stanley Smith Barney joint venture, which was formed in June 2009.

Citigroup in June 2009 sold Smith Barney to the joint venture, booking a gain of $11.1 billion, or $6.7 billion after taxes, while retaining a 49% stake in the joint venture. Morgan Stanley had the option of purchasing Citigroup's minority stake in the joint venture over a three year period, beginning this year.

Morgan Stanley in June informed Citigroup that it would purchase an additional 14% stake in the joint venture from Citigroup, after which the companies took over three months to arrive at the joint venture's valuation. The two companies announced that week that Morgan Stanley would buy Citigroup's entire stake, taking another 15% by June 1, 2013, and the remainder by June 1, 2015.

Hawken estimates that Citigroup will report earnings of $3.90 for all of 2012, followed by EPS of $4.75 in 2013.

The analyst said that "Citi's brand is still its biggest asset, especially outside of the United States," and that "we believe the firm will leverage this strength to capitalize on strong demographic and economic trends that exist globally," but that the company "still has a number of major challenges that it faces and is working through."

Looking beyond the 12-month outlook for most sell-side analysts' price targets and recommendations, Hawken said that "Citi is likely a great stock over a longer time horizon," and that "unlocking capital trapped" in the Citi Holdings runoff subsidiary, as well as in the company's deferred tax assets valuation allowance, "could result in strong shareholder returns."

C Chart C data by YCharts

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

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