Citigroup Inc. (VS) is a renowned global financial services company with approximately 200 million customer accounts in 160 countries. The bank operates in two segments: Global Consumer Banking; and the Institutional Clients group.
It has an ISS Governance QualityScore of 2, indicating a relatively low governance risk.
However, C consistently underperformed his peers. The stock has gained 1% during the last year. This compares to the iShares Global Financials ETF (IXG) 24.9% returns over this period.
Here’s what could shape C’s performance in the short term:
In September 2020, Jane Fraser announced plans to restructure Citigroup operations to increase profit margins and share price performance following her appointment as CEO. Under his leadership, C prepares to quit non-essential activities which include consumer franchises in 13 markets in the Asia and EMEA regions.
Earlier this month, Fraser announced C’s plan to split or sell its retail banking business in Mexico as part of its “strategy refresh.” This should allow the bank to optimize its resources based on its main strengths and competitive advantages. However, the bank plans to keep the business of its institutional clients in the country.
Also, C sold his consumer bank franchise in the Philippines at Union Bank of Philippines last December. That month, the bank also sold its Citi International Financial Services, LLC (CIFS) and Citi Asesores de Inversion Uruguay SA (Citi Asesores) business to Miami-based independent broker Insigneo.
Mixed growth story
C’s revenue has grown at a CAGR of 4.5% over the past three years and at a CAGR of 3.3% over the past five years. However, the company’s EBITDA has declined at a rate of 6.6% per annum over the past three years and at a rate of 1.9% per annum over the past five years. Its total assets have declined at a rate of 3.2% per year over the past five years. Nonetheless, C’s net profit and EPS have grown at CAGRs of 9.5% and 17.9%, respectively, over the past five years.
Lower rating than industry
In terms of a forward non-GAAP P / E, C is currently trading at 6.36x, which is 45.2% below the industry average of 11.61x. The stock’s forward price / sell multiple of 1.88 is 47.4% lower than the industry average of 3.58.
Additionally, C’s non-GAAP PEG forward ratio of 0.41 is 58.5% lower than the industry average of 0.98. And its futures price / book multiple of 0.72 is 45.3% lower than the industry average of 1.32.
Dark prospects for growth
The Street expects C’s revenue to grow 2.1% in the quarter about to be released (ended December 2021) and 1% in fiscal 2022. However, Company revenues are expected to decline 5.3% in the current quarter and 4.6% in fiscal 2021.
Analysts expect C’s EPS to decline 32.7% in the fourth quarter of fiscal 2021, 41.2% in the current quarter, and 22% in fiscal 2022.
POWR Ratings reflect uncertainty
Citigroup has an overall C rating, which indicates a neutral rating in our POWR odds system. POWR scores are calculated taking into account 118 separate factors, each factor being weighted to an optimal degree.
The stock has a C rating for stability, momentum and quality. Its relatively high beta of 1.79 is in line with the stability rating. Additionally, C is currently trading above its 50-day moving average of $ 64.25 but below its 200-day moving average of $ 69.95, justifying the Momentum rating. In addition, its 12-month rolling ROE of 12.17% is 4.5% lower than the industry average of 12.75%, which explains the quality score.
Out of the 10 C-rated actions Money center banks industry, Citigroup is ranked No. 6.
Beyond what I’ve stated above, check out Citigroup’s ratings for Growth, Sentiment, and Value here.
C should benefit from the Fed’s hawkish tilt as an increase in benchmark interest rates would increase the bank’s profit margins. However, C’s bottom line is expected to be affected in the near term as part of its ongoing strategic restructuring efforts. Thus, we believe that investors should wait for C’s operations to stabilize before investing in the stock.
How does Citigroup Inc. (C) compare to its peers?
Although Citigroup has a C rating in our proprietary rating system, one might consider looking at its industry counterpart Wells Fargo & Company (WFC), which has a B (Buy) rating.
C shares were trading at $ 67.13 per share on Wednesday morning, up $ 0.02 (+ 0.03%). Year-to-date, C has gained 11.16%, compared to a -1.09% increase in the benchmark S&P 500 over the same period.
About the Author: Aditi Ganguly
Aditi is a seasoned content developer and financial writer who is passionate about helping investors understand the dos and don’ts of investing. She has a keen interest in the stock market and has a fundamental approach to stock analysis. Following…