Citigroup Inc

Citigroup Details

Citigroup Inc (NYSE: C) is the leading global bank with around 200 million customer accounts. It provides various financial products and services that include consumer banking as well as credit, corporate and investment banking, securities brokerage, transaction services, and wealth management.

Result Performance for Q3FY21 (For the Quarter Ended 30 September 2021)

• Revenue declined by 1% YoY to $17.2 billion and it included a pre-tax loss of around $680 million with respect to the sale of the Australia consumer business in Global Consumer Banking (GCB).
• Without considering the loss on the sale, revenues grew by 3% mainly supported by growth across the Institutional Clients Group (ICG).
• Net income surged by 48% YoY to $4.6 billion led by the benefit of lower cost of credit, partly offset by the lower revenues and higher expenses.
• Earnings per share increased to $2.15, up by 58% YoY due to the growth in net income and a 3% decline in shares outstanding.

Key Data (Source: Company Report)

Recent Update

• As per the press release dated 29 October 2021, Citigroup announced the redemption, in whole, constituting $1,500,000,000 of its 2.312% Fixed Rate/Floating Rate Notes due 2022 and the redemption, in whole, constituting $500,000,000 in aggregate principal amount, of its Floating Rate Notes due 2022.
• Citigroup, on 28 October 2021, has declared the offering of the inaugural Citi Social Finance Bond, worth $1 billion. This bond assists the social-focused developments in emerging markets globally. The proceeds from the bond will be utilized towards financing various projects.

Key Risks:

The group is exposed to the risk of uncertainties associated with COVID-19 pandemic that could adversely hurt its businesses as well as 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.

Outlook

It is advancing with urgency on its top priorities that include - the Transformation, refreshing its strategy and building a culture of excellence. Further, the company’s key priorities include increasing returns for shareholders. At the end of Q3 FY 2021, its Common Equity Tier 1 Capital Ratio stood at 11.7%.

Valuation Methodology: Price/BVPS Based Relative Valuation (Illustrative)

Technical Overview:

Daily Price Chart

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

Stock Recommendation                               

The company has delivered a 9-month and 1-year return of ~+19.13% and ~+68.06%, respectively. In addition, the stock is trading higher than the average of the 52-week high price of $80.29 and the 52-week low price of $41.20.

The stock has been valued using a P/BV multiple-based illustrative relative valuation and the target price so arrived reflects a rise of low double-digit (in % terms). In addition, a slight premium has been applied to P/BV Multiple (NTM) (Peer Average) considering its substantial capital and liquidity positions as well as significant growth in net earnings in Q3FY21.

Considering the aforementioned factors along with strategic investments towards growth, a “Buy” recommendation has been assigned on the stock at the current market price of $69.18 per share as of 1^st November 2021 (Time: 10:10 AM, NY, USA).

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