Jefferies Upgrades Citi To Buy, Sounds Optimistic Note On Latin American Business

Citigroup, Inc. C has been a major market laggard over the past year, but one Wall Street analyst said Friday that Citi’s business will be turning the corner in 2019.

The Analyst

Jefferies analyst Ken Usdin upgraded Citigroup from Hold to Buy and raised the price target from $64 to $73.

The Thesis

Usdin listed three primary reasons investors can expect big things out of Citi this year:

• An improving customer mix that should produce better U.S. branded credit card revenue growth.
• Citi’s Mexico and Latin American banking business should start to meaningfully contribute after several years of heavy investments.
• Citi’s global institutional clients business is firing on all cylinders.

“We see risk-reward as skewed to the positive, especially if Citi starts showing tangible progress toward its 13.5 percent [return on average tangible common equity] goal for ‘20,” the analyst said. 

Jefferies’ base-case projections for Citigroup include $9.15 in 2020 EPS and a target earnings multiple of just 8.0.

Usdin isaid he's anticipating “modest” credit normalization, low single-digit loan and fee growth and lower expenses over time.

Jefferies is below consensus expectations on near-term revenue growth, but Usdin said consensus estimates for costs, credit costs, taxes and buybacks are too low.

In the first quarter, Usdin said investors should brace for trading revenues and investment banking revenues that are down 7 percent due to headwinds such as the government shutdown and market jitters following the December sell-off.

Price Action

Citigroup stock was down 0.11 percent at $64.24 at the time of publication Friday. 

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