Market Overview

Morgan Stanley Cuts Citi Earnings Estimate 64%

Related C
Fast Money Traders Share Their Picks For The Market Turnaround
The Top 11 Analysts On TipRanks And What They Cover
Like BofA And Citigroup, Deutsche Bank May Be Setting Up (Investor's Business Daily)

Morgan Stanley analyst Betsy Graseck released a note lowering her estimate for Citigroup’s (NYSE: C) 2014 Q2 EPS to $0.40 from $1.10 following the recent press suggesting a $4 billion hard-dollar Dow Jones settlement.

Citi is preparing to pay $7 billion to settle a U.S. Department of Justice investigation into possible investor fraud on its mortgage backed securities. The payment includes a $4 billion hard-dollar settlement (higher than the prior $1.3 billion estimate) and a $3 billion soft dollar to serve as mortgage relief to homeowners or used to repair blighted neighborhoods.

Graseck thinks Citigroup’s settlement will put pressure on Bank of America to announce a settlement soon as well.

Related Link: Another Bank Comments On Multiples Driving Returns

Despite this legal action, Citi still holds an Overweight rating with a price target of $58. Graseck notes that there are both potential downside and upside risks facing Citi in the upcoming year.

Possible downside risks for Citi shares include:

  • Spread compression
  • Flat-to-higher expenses
  • Euro volatility
  • Emerging market slowdown
  • Rising losses in non-core
  • Delayed capital return
  • Inability to utilize the DTA
  • Inability to repurchase shares and inability to achieve 2015 financial targets announced by management in March 2013

Possible upside risks include:

  • Lower card losses than anticipated
  • Faster international growth
  • Market share gains, achieving 2015 financial targets sooner than expected
  • Reserve bleed out of Citi Holdings (non-core)
  • Retaining Citi Holdings Businesses and strategic actions

Citigroup shares are trading flat Wednesday morning.

Latest Ratings for C

Apr 2017Keefe Bruyette & WoodsUpgradesMarket PerformOutperform
Mar 2017Evercore ISI GroupDowngradesBuyIn-Line
Jan 2017UBSDowngradesBuySell

View More Analyst Ratings for C
View the Latest Analyst Ratings

Posted-In: Betsy Graseck Morgan StanleyAnalyst Color Analyst Ratings


Related Articles (C)

View Comments and Join the Discussion!