14 BARRON’S March1,
hardly any capital in 2012 to returning
nearly $80 billion in capital to our
shareholders over the last six years,
which reduced our share count by
30%. A number of factors make this
the right time for Citi to refresh our
strategy and drive sustainable earn-
ings growth that closes the returns
gap with our peers.”
Citigroup declined to make Fraser
available for an interview.
Citigroup still has too many busi-
nesses that can’t compete efficiently. For
too long, the company has tried to be
everything to all people, and that needs
to stop. That means trimming the num-
ber of retail branches it operates glob-
ally, now around 2,300. Recent reports
suggest Citi has been exploring the sale
of some businesses in Asia. “Limited
scale in several of C’s consumer mar-
kets has inspired lower returns,” writes
BMO Capital Markets analyst James
Fotheringham. “If confirmed, we would
applaud such a strategic initiative.”
The good news for investors is that
getting smaller could unlock a lot of
value. Wells Fargo’s Mayo argues that
Citi’s parts are worth more than the
whole. Its U.S. consumer bank, for
instance, could trade at 1.6 times
tangible book value if it were valued
like a stand-alone regional bank, while
its Latin American and Asian
consumer units could be worth 1.
and 1.3 times, respectively, based on
regional peers. Its investment bank
would trade at 1.7 times book if it were
valued similarlyMorgan Stanley
(MS) andGoldman Sachs Group
(GS), while its transaction-services
unit could trade at 1.7 times. All told,
the company would be worth 1.5 times
tangible book—or $111 a share—
“reflecting significant hidden value
and trapped capital,” Mayo explains.
No one expects Citi to trade that high
soon. Mayo’s price target, based on six
different valuation methodologies, is
$74, up 12% from Friday’s close.
We’d call that a good start.B
Citigroup Key Data
Recent Price $67.
Market Value(bil) $140.
52-Wk Change -1.1%
2021E Revenue(bil) $69.
2021E EPS $6.
2021E P/E 10.
Dividend Yield 3.0%
Price/Tangible Book Value 0.
E= estimate Source: FactSetHOW DO YOU MANAGE
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