Citi is by far the cheapest of the 4 U.S megabanks with a P/E of 7.5 and is even trading below it's tangible book value of 90 dollars a share. This isn't without reason however, Citigroup has been through a lot since its 1999 merger with travelers. Right after the merger they became thing big bloated institution that was extremely difficult to control and as a result nearly collapsed in 2008 and had to take the largest government bailout of all the major U.S banks. Since then it has done a lot of work restructuring and making itself a more lean and easier to control institution. However it still lags behind its competitors in share price mainly because while Citi isn't in danger of collapsing and isn't as much mess anymore, it hasn't defined what kind of bank its going to be post restructuring.
Citigroup's main strength and power is it's investment & corporate banking arm which has an excellent reputation in wealth management and FX and especially in fixed income trading and debt derivatives, it lags slightly behind in equites trading however that has been catching up fast. The main problem here is its commercial bank which is very global and operates only 723 branches in the U.S. This business model is fundamentally flawed because its way to diversified without any meaningful substance to compete with local players which is why it has been trading so low for so many years.
However now with the new CEO and after many of its old board members got ousted in 2019 it seems to me like a sleeper hit in the banking world. The new CEO is Prioritizing the investment and cooperate banking arm instead of trying to keep the overdiversified commercial bank alive and sold of retail banking units in 13 countries and is focusing those resources into the way more successful investment bank and it doesn't look like she's stopping anytime soon. In my opinion there are two ways Citi could move forward, either it could divest from many of its unprofitable commercial banking ventures and invest that into making itself an even stronger investment bank, or it could use those resources to buy a major U.S commercial bank to compete with the other 3 megabanks.
Overall while Citi has been a mess in the past and its current share price reflects that. It fails to take into account what Citi could be if this new CEO manages to follow through on the restructuring since the GFC and finally give Citi a sense of direction and identity, so far she's off to a good start and I think at its current price Citi has great risk/reward.
Submitted October 09, 2021 at 11:10PM by Ok-Lie-4596 https://ift.tt/3oJi1FT
