Why This Citigroup Analyst Is Turning Bearish: 'Higher Tail Risks'

Citigroup Inc’s C prospects have been hurt by the lack of near-term catalysts and the negative impact of de-globalization, according to Morgan Stanley.

The Citigroup Analyst: Betsy Graseck downgraded Citigroup from Equal-Weight to Underweight, while reducing the price target from $75 to $60.

The Citigroup Takeaways: Although Citigroup’s new CEO Jane Fraser is taking proactive steps to boost returns, these actions “will take time to play out,” since the company faces near-term headwinds as it makes investments to drive future revenue growth, Graseck said in the downgrade note.

“In our view, Citi's granular revenue targets seem a bit punchy as they are roughly double what we are modeling for peers and reflect a significant improvement from Citi's historical performance,” the analyst wrote.

“Not only does Citi need to execute on multiple fronts (wealth management, treasury and trade services, US personal banking), but it also needs to do this in an environment with higher tail risks both domestically and internationally,” she added.

“The shift toward de-globalization is also negative for Citi, the most global of the US banks we cover,” Graseck said. She said there seems to be limited upside to the stock “until management can show progress toward the company's new 11-12% targets.”

C Price Action: Shares of Citigroup were down 2.25% at $55.44 Monday morning.