Market Overview

Richard Pzena Is Bullish On Citigroup Inc

Related C
12 Big Banks To Watch Ahead Of The Coming Fed Stress Test
Here Are Morgan Stanley's Top Bank Ideas
Bank Stock Roundup: Spurt in Regulatory Probes on Banks; BofA, JPMorgan in Focus - Analyst Blog (Zacks)

Richard Pzena of Pzena Investment spoke on CNBC about Citigroup Inc (NYSE: C) and its current obstacles to grow earnings.

He likes the financials and thinks that there is a lot of room for these stocks to trade higher and the downside is limited.

Pzena said Citigroup has three issues that are depressing its earnings.

  • Low interest rates are hurting profitability of Citigroup's deposit gathering franchise. He believes the costs to gather deposits are high for banks and the opportunity to make money on these deposits are non-existing. He added that Citigroup's earnings would get a big boost if interest rates increase and the deposit spreads go back to historical norms.
  • Depressed trading volumes are approximately 30 percent to 40 percent below historical norms and that is a problem for investment banking and trading arms of big banks. Citigroup is not an exception and this would have to change for banks to increase its earnings.
  • The expenses that banks are incurring are above historical norms and dealing with a regulatory change, pressure and litigation are inflating the expenses.

Without the three obstacles mentioned above, Citigroup would make $8 per share and it is currently earning $4. Pzena believes that owning the stock right now offers a good trade off, because the potential growth in earnings offers a huge upside potential if the obstacles don't go away.

Posted-In: Citigroup Pzena Investment Richard PzenaCNBC Media


Related Articles (C)

Around the Web, We're Loving...

Get Benzinga's Newsletters

Our Experts vs. S&P 500Powered by Benzinga
Marketfy Products Return S&P 500
Morning Profit Maker 42.72% 6.69%
The Option Prophet 91.14% 6.69%
SecretCaps 26.55% 6.69%
Short-Term Trend Trading 11.89% 6.69%
View the highest rated products→