On Monday, CFRA upgraded shares of Citigroup Inc. (NYSE:C) from Hold to Buy, adjusting the price target upward to $65 from the previous $54. The revision reflects a forward price-to-earnings (P/E) ratio of 10.8 times, aligning with the bank's five-year historical average.
The new price target represents a 20% discount to Citigroup's net tangible book value (NTBV) of $81.65, a notable contrast to its peers, which typically trade at par or above NTBV.
The upgrade comes as Citigroup focuses on streamlining operations and growing its market-leading sectors. The firm has a strong presence in corporate treasury services, where it is seeing an increase in recurring fee revenue and new account growth. Additionally, Citigroup is recognized for its global banking services for institutions and personal banking outside the United States.
Management at Citigroup has set targets to improve operating efficiency, including $1.5 billion in restructuring and severance costs for 2023 and an additional $700 million to $1 billion for 2024.
These initiatives are expected to enhance profitability and free cash flow for the bank. Despite these positive developments, CFRA's earnings per share (EPS) estimates for Citigroup remain unchanged at $6.00 for 2024 and $7.05 for 2025.
The firm acknowledges potential risks to its rating, particularly the impact of a steep decline in interest rates. This is a significant consideration given that 70% of Citigroup's total revenue in 2024 was generated from net interest income.
Looking forward, the analyst anticipates higher noninterest income growth and wider margins for Citigroup.
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