Business Updates on One Blue-Chip Banking Stock – Citigroup

Citigroup Inc

Citigroup Details

Citigroup Inc (NYSE: C) is the leading global bank. It provides various financial products and services, including consumer banking and credit, corporate and investment banking, securities brokerage, transaction services, and wealth management.

Result Performance for Q4FY21 and FY21 (For the Period Ended 31 December 2021)

• Revenue inclined by 1% YoY to $17.0 billion in Q4FY21, supported by robust growth in Investment Banking in the Institutional Clients Group (ICG) and higher revenues in corporate/other.
• Net income reduced by 26% YoY to $3.2 billion in Q4FY21 due to higher expenses and was partly offset by increased revenues and lower cost of credit.
• For FY21, Citigroup reported a net income of $22.0 billion compared to $11.0 billion in FY20, with revenues of $71.9 billion in FY21 versus revenues of $75.5 billion in FY20.

Source: Analysis by Kalkine Group

Recent Update

• On 30 March 2022, Citi declared an agreement to sell its consumer businesses in India to Axis Bank Limited. The transaction is likely to be completed in the first half of 2023.
• On 24 March 2022, the Citi Foundation launched a new $50 million Request for Ideas (RFI) to further assist the growth of Community Development Financial Institutions (CDFIs) across the United States.

Outlook

As part of Citigroup’s strategic refresh, Citigroup continues to build on strength in core franchises and invest in growth prospects and exploit synergies across the firm and lower structural complexity. It aligns its organization and reporting structure with its strategy, comprising the formation of the Personal Banking and Wealth Management and Legacy Franchises segments. This will enable Citigroup to better focus on its core businesses and optimize the selected companies to exit. Citigroup continues to Transform its bank, emphasizing simplification and setting a culture of excellence. Notably, Citigroup is focused on driving revenue growth, disciplined expense management, improving returns over the medium term, and maintaining substantial capital & liquidity.

Key Risks

The group is exposed to the risk of uncertainties associated with the COVID-19 pandemic that would adversely affect its businesses, results, and financial condition. Further, it is susceptible to the risk of changes in regulation and legislative uncertainties in the U.S. and globally. Moreover, it operates in a highly competitive environment, and the evolution of emerging technologies could fast-track disruption in the financial services industry.

Valuation Methodology: Price/Book Value Per Share Based Relative Valuation (Illustrative)

Technical Overview:

Daily Price Chart

Source: REFINITIV, Note: Purple color line reflects Relative Strength Index (14-Period)

Stock Information                                      

The stock is trading lower than the average of the 52-week high price of $80.29 and the 52-week low price of $53.83.

The stock has been valued using a Price/B multiple-based illustrative relative valuation and the target price so arrived reflects a rise of low double-digit (in % terms). A slight premium has been applied to Price/B Multiple (NTM) (Peer Average), considering its strong capital position as well as solid results in investment banking with share gains in advisory and equity underwriting.

Considering the aforementioned factors along with its progress in the execution of its growth strategy, we give a “Buy” recommendation on the stock at the closing market price of $53.40 per share, down by 2.86% as of 31^st March 2022.

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

Citigroup, Inc. (C) is a part of Kalkine’s Global Big Money Product

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decisions should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.

Technical Indicators Defined:-

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.