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Summary
- Citigroup’s stock is undervalued, with a huge disconnect between market valuation and company guidance.
- Sentiments on the institutional side are beginning to change, with bullish views on C stock emerging.
- Near-term catalysts include Q4-2023 earnings and the Fed’s release of the annual CCAR stress tests in June 2024.
My recent Citigroup (NYSE:C) article described it as an asymmetric risk-rewards opportunity. The stock was trading at less than 0.6x tangible book value (“TBV”) which indicates that Mr. Market was assuming a return on tangible common equity (“RoTCE”) at around mid-single-digit.
Whereas the management team is guiding for 11% to 12% RoTCE in the 2025-2026 period. There remains a huge disconnect between what the market valuation is implying and the guidance by the company. This has to converge in the next 12 to 18 months one way or another.
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