Citigroup (C) Bull/Bear Cases for 2011
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Price: $138.07 +3.52%
Rating Summary:
31 Buy, 10 Hold, 2 Sell
Rating Trend:
Up
Today's Overall Ratings:
Up: 10 | Down: 6 | New: 39
Rating Summary:
31 Buy, 10 Hold, 2 Sell
Rating Trend:
Up
Today's Overall Ratings:
Up: 10 | Down: 6 | New: 39
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Deutsche Bank analysts made their Bull and Bear cases for Citigroup Inc. (NYSE: C) shares as the firm looks to continue on the road to recovery after nearly collapsing amid the economic downturn.
Deutsche Bank has a Buy rating on Citigroup, with a price target of $5.50 on the stock.
Shares of Citigroup are down 5 cents to $4.89 in midday market movement on Monday.
Deutsche Bank Bull arguments for Citigroup going forward in 2011:
There will be more interest in Citigroup in 2011. "The government’s exit of C removed a significant overhang at the company and we think there will be more interest in the C story in 2011. The stock remains under-owned among large institutional investors, in our view."
Citigroup will have more exposure to international market in 2011. Deutsche Bank says that Citigroup is the only U.S. bank with a meaningful presence in emerging markets in each of its core segments. "In total, non-US revenue represent about 50% of revenue at Citi overall (ie including the core and runoff segments). Average loans in the international consumer banking segment rose 11% vs. a year ago and could accelerate."
Citigroup has one of the highest capital/reserves among the bank, as the firm's Tier 1 common ratio under Basel 3 is 10.3%, and according to Deutsche Bank could reach 10.7% by 2012.
Bear cases for Citigroup:
The operating leverage could remain weak into 2011 as, "There will likely be ongoing pressure within the US retail bank given the revenue drags from regulatory pressure, weak loan demand, and investments being made. Improving operating leverage in its global transaction services businesses may be challenging given the low rate environment and required ongoing investments."
May take longer to wind down the remaining components of Citi Holdings, as the meatier chunks of the units have already been sold-off, which means it will take longer to runoff the remaining assets.
Deutsche Bank still sees credit concerns with Citigroup. "Citi’s performing TDRs rose by 9% to $27b (potentially doubling NPA levels if they were all included). Citi’s exposure to home equity of about $50b (7% of loans) is less than most other large banks (at 14%), but the mix appears riskier."
One move that Deutsche Bank sees is that Citigroup moving the $50 billion private label card business, which is currently included in CitiHoldings, back to the core of the company. "Meaningful acquisitions seem unlikely anytime soon in our view."
Deutsche Bank has a Buy rating on Citigroup, with a price target of $5.50 on the stock.
Shares of Citigroup are down 5 cents to $4.89 in midday market movement on Monday.
Deutsche Bank Bull arguments for Citigroup going forward in 2011:
There will be more interest in Citigroup in 2011. "The government’s exit of C removed a significant overhang at the company and we think there will be more interest in the C story in 2011. The stock remains under-owned among large institutional investors, in our view."
Citigroup will have more exposure to international market in 2011. Deutsche Bank says that Citigroup is the only U.S. bank with a meaningful presence in emerging markets in each of its core segments. "In total, non-US revenue represent about 50% of revenue at Citi overall (ie including the core and runoff segments). Average loans in the international consumer banking segment rose 11% vs. a year ago and could accelerate."
Citigroup has one of the highest capital/reserves among the bank, as the firm's Tier 1 common ratio under Basel 3 is 10.3%, and according to Deutsche Bank could reach 10.7% by 2012.
Bear cases for Citigroup:
The operating leverage could remain weak into 2011 as, "There will likely be ongoing pressure within the US retail bank given the revenue drags from regulatory pressure, weak loan demand, and investments being made. Improving operating leverage in its global transaction services businesses may be challenging given the low rate environment and required ongoing investments."
May take longer to wind down the remaining components of Citi Holdings, as the meatier chunks of the units have already been sold-off, which means it will take longer to runoff the remaining assets.
Deutsche Bank still sees credit concerns with Citigroup. "Citi’s performing TDRs rose by 9% to $27b (potentially doubling NPA levels if they were all included). Citi’s exposure to home equity of about $50b (7% of loans) is less than most other large banks (at 14%), but the mix appears riskier."
One move that Deutsche Bank sees is that Citigroup moving the $50 billion private label card business, which is currently included in CitiHoldings, back to the core of the company. "Meaningful acquisitions seem unlikely anytime soon in our view."
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