Citigroup (C) is one of the world’s largest banks, with over $2.4 trillion in assets, asserts Chris Preston, a leading specialist in growth and value investing and the editor of Cabot Value Investor.
The bank’s weak compliance and risk-management culture led to Citi’s disastrous and humiliating experience in the 2009 global financial crisis, which required an enormous government bailout.
The successor CEO, Michael Corbat, navigated the bank through the post-crisis period to a position of reasonable stability. Unfinished, though, is the project to restore Citi to a highly profitable banking company, which is the task of new CEO Jane Fraser. Investors have lost hope in Citigroup, creating an impressive bargain.
There was no major company-specific news for Citigroup recently, though the bank reported strong quarterly earnings last month. Revenue came in at $21.1 billion, ahead of $20.4 billion expected.
Earnings per share of $1.86 blew away analyst estimates of $1.23. However, EPS was down 27% from last year’s first-quarter tally due to higher expenses and credit costs.
Revenue was also down, about 2% year over year, but it was only down compared to a first quarter last year in which the bank sold an overseas business. The highlight was Citi’s investment banking unit, which saw a 35% revenue bump on the strength of a solid Q1 for the market.
Investors initially sold out of C after the report but have since come around, and the stock is up since a mid-April bottom at $57. The shares currently trade at less than 11x earnings and at 1.5x sales. We rate the stock a buy.
