UPDATE: Goldman Sachs Downgrades Citigroup on Valuation

In a report published Wednesday, Goldman Sachs analyst Richard Ramsden downgraded the rating on

from Conviction List-Buy to Neutral, but raised the price target from $58.00 to $60.00. In the report, Goldman Sachs noted, “When we upgraded Citi to Buy in 2012 and upgraded it to CL-Buy in January 2013, we had four key drivers of our theses: (1) Citi had the ability to restructure several businesses to improve profitability, (2) the earnings drag from Citi Holdings would abate with time and higher housing prices, (3) its valuation was very attractive with the stock trading at a large discount to tangible book value despite ‘normal' returns in excess of cost of capital, and (4) over the longer term, Citi was among the banks best positioned to return capital. With the exception of outsized capital returns, all of these drivers have occurred over the last year and we now believe valuation more accurately reflects the strength of Citi's core franchise. Over the longer term, Citi is still among the banks best positioned to return capital but with the introduction of much more onerous capital rules for large-cap banks (LCR, Basel 3 CCAR, supplementary leverage ratio), we see risk that Citi's capital return story will be more muted in the near term than we had previously expected (which also limits the ROE improvement story).” Citigroup closed on Tuesday at $52.62.