Most investors know Citigroup as one of the largest banks in the United States, as it lies in the same line as Bank of America and JPMorgan Chase. Although Citigroup had not previously performed as well as the competition, it turned a new leaf as Jane Fraser took over as the country’s first female chief bank executive.
The stock price has risen significantly and appears to be in a good place for long-term potential growth. Furthermore, there are several impactful transformations underway at Citigroup. They may help the bank and its stock perform better than before.
Does this mean you should invest in Citigroup stocks? Is the stock worth buying despite its poor performance compared to other major banks in the country? Find out in this guide.
Citigroup’s current share price
As of December 27, 2021, Citigroup’s current share price is $60.65. The stock has a market capitalization of $120.346 billion and is expected to reach its target of $82.64 within a year.
Looking at these numbers, you can easily say that the Citigroup stock is worth the investment. But you should also be aware of the concerns about the bank and its stock.
Concerns about Citigroup stock
With the appointment of the new CEO, there have been several changes in Citigroup. Some of them are worrying for investors.
Exiting the consumer market
Earlier in 2021, Fraser announced that the bank would sell or exit its retail banking franchise in about 13 markets globally. The decision was made to free up a whopping $7 billion. Although investors initially supported the idea, Citigroup’s exit from the first two global markets was not very smooth. The bank’s first sale was a consumer franchise in Australia. The sale resulted in a pre-tax loss of $680 million in the third quarter.
Second, Citigroup announced that it will exit its consumer franchise in South Korea without selling it. The move could cost the company more than $1 billion.
Although these two exits have generated about $2.8 billion in capital, investors are still hopeful that future exits or sales will be smoother than these.
The bank is going through huge transformations but doesn’t seem to be getting much credit from the market. Thus, the management of the bank will have to implement its plan very well because investors and analysts are raising them to high levels.
If Citigroup wants to attract stakeholders and investors, management will have to leave no room for error.
Earlier this year, Citigroup’s board of directors approved incentives based on three key figures in the organization that could earn up to $5 million based on how successful the turnaround plan is.
Incentives will depend on the performance of these individuals. While stimulating management boosts performance, investors are not entirely satisfied with the idea. The bank’s stock has underperformed for years, and it’s easy to see why investors are being cautious and understandably so.
Even if the bank had a basis to justify this compensation, shareholders and investors would not have enough patience left. They want to see the bank put them above the needs of its management.
Is Citigroup Stock Worth Investing?
Whether or not you consider Citibank stock a good buy depends on the success of the bank’s turnaround plans. Earnings reports for the fourth quarter of 2021 will be released in January of next year. Although each subsequent report of the bank will be of paramount importance, this report may dictate how the investment path will look for Citigroup.
Citigroup will also be organizing Investor Day on March 2, 2022. The bank will lay out its transformation plans in front of investors, giving them a peek into the full view of the institution. Hopefully, Investor Day will provide investors with some concrete information about the bank, such as the return on equity that the bank expects to achieve or the trends that the expenditures will be in.
It is also important to remember that Citigroup will still have to sell many of its global markets to free up the remaining capital. If these sales were better than previous sales, the bank’s stock could do much better.
Current price and turnover
Another reason that makes a stock an attractive investment is its current price. Currently, the stock’s price to book value ratio is 0.6582, as of December 27, 2021, which means it’s trading for less than its asset value. Such a number is an indicator of a stock that has an attractive value, especially when you take into account management efficiency and growth potential.
Return on equity is a measure of an enterprise’s investment worthiness. It is calculated as the company’s income divided by average shareholders’ equity over the past 12 months, including any profits reinvested in the company. Citigroup also has a return on equity of 13.12%, which indicates that the bank is heading in the right direction as this value is above the industry average.
Overall, Citigroup stock is worth buying because it has been doing well lately. The metrics also show the bank’s ability to do better in the coming year. If exits and additional sales in international markets go well, then surely the bank’s shares will do well as well.
Take the final
As evidenced by the current state of Citigroup Bank, it is clear that investors should consider putting their money into Citigroup stocks. The bank is expected to undergo major transformations in the coming year as well.
The earnings report for the fourth quarter of 2021, along with insight into the company’s complete transformation plans, will help determine how much potential the stock has.
good to know
Tangible book value is the value of the enterprise if liquidated. Currently, Citigroup is trading at approximately 80% of its tangible book value. Thus, there is a good opportunity for investors to buy shares in one of the largest and well-established banks in the field of investment banking.
Information is accurate as of December 27, 2021.
Editorial note: Citibank does not provide this content. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author alone and have not been endorsed by Citibank.
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