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 and 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 as it included a pre-tax loss of around $680 million concerning the sale of the Australian 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.

Source: Company Reports, Analysis by Kalkine Group

Recent Update

• On 22 December 2021, the company declared that it had agreed to sell its Philippines consumer banking franchise to UnionBank of the Philippines.
• On 17 December 2021, Citigroup announced that it would release its Q4FY21 results on 14 January 2022.
• As per the press release dated 17 December 2021, Citi, acting through Citibank N.A., has been selected by Accor SA as successor depositary bank for its Sponsored Level 1 American Depositary Receipt (“ADR”) programme.
• Citi and Insigneo have signed an agreement under which the Miami-based independent broker-dealer and Registered Investment Advisor (RIA) will acquire Citi International Financial Services, LLC and Citi Asesores de Inversion Uruguay S.A.

Outlook

It is advancing with urgency on its top priorities, including the transformation, refreshing its strategy, and building a culture of excellence to narrow the returns gap among its peers effectively. It is strengthening its risk and control environment to attain operational excellence. Further, the company’s key priorities include increasing returns for shareholders and boosting capital return over time. Besides, it maintained a strong capital position with the common equity tier 1 capital ratio of 11.7%. Citigroup has returned around $11 billion to shareholders through healthy dividends and stock repurchases to date in 2021. Further, it remains committed to returning surplus capital over and above the required amount towards investment in its franchise and sustaining its safety and soundness.

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/BVPS Based Relative Valuation (Illustrative)

Technical Overview:

Daily Price Chart

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

Stock Information                                           

The company has delivered a 6-month and one-year return of ~-14.90% and ~-0.71%, respectively. The stock is trading lower than the average of the 52-week high price of $80.29 and the 52-week low price of $57.40.

The stock has been valued using a Price/BVPS 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/BVPS Multiple (NTM) (Peer Average), considering its substantial capital and liquidity positions and significant growth in earnings in Q3FY21.

Considering the aforementioned factors along with strategic investments towards growth, a “Buy” recommendation has been assigned on the stock at the closing market price of $60.43 per share, down by 0.18% as of 30^th December 2021.

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.