Here's Why The Bullish Case For Citigroup's Stock Can Now Be Made

Down more than 15 percent since peaking in late January, shares of Citigroup Inc C should now be bought, according to Deutsche Bank.

The Analyst

Deutsche Bank's Matt O'Connor upgraded Citigroup from Hold to Buy with a price target lifted from $74 to $76.

The Thesis

Citi's stock weakness since January likely reflects multiple factors, O'Connor said in a note. These include rising U.S. rates, a strengthening U.S. dollar, trade uncertainty, ongoing mixed trends in credit card usage, and slower than expected improvements in management's efficiency efforts.

Over the past few weeks, however, multiple positive developments and removal of overhangs has been made clear, the analyst said.

• Management extended and re-negotiated its right to retain ownership of Sears' SHLD card portfolio where 70 percent of the volume comes from outside of the retailer.
• A seven-month long promotional offer related to the Costco COST card has come to an end which should help boost margins.
• Management confirmed all of its big card partners are signed through at least 2022.
• Management reiterated its 2018 efficiency ratio at or slightly above 57 percent and expectations for a low 50s efficiency ratio in 2020 isn't priced into the stock today.
• Management's commitment to return at least $20 billion of capital per year represents 12 percent of its market cap which makes it among the largest capital return stories among big banks.

Price Action

Shares of Citigroup were trading around $67.30 Wednesday afternoon.

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