Citigroup Inc. (NYSE:C) has been the centre of attention for a while with its latest quarter results. Last Tuesday the company share price rose by $0.18 hence covering the short term risk. It closed at $49.39 and went from a stock to “hold” to a stock “buy” according to a research firm Deutsche Bank (NYSE:DB). The analyst in charge for Deutsche Bank (NYSE:DB), Matt O’Connor, reported that he and the crew think Citigroup Inc. (NYSE:C) has an inflated EPS which is around 5% higher than it should be for 2015’s fiscal year and 8% for 2016’s fiscal year. He even states that many of the money banks in the U.S. are valued around 1.2-1.3 times of tangible book value while Citigroup Inc. (NYSE:C) stands at a 15% discount on tangible book value. With all this in mind, the question really is: whether the stock is a good buy or not?
There have been forecasts by O’Connor and his team at Deutsche Bank (NYSE:DB) regarding how Citigroup Inc. (NYSE:C) will perform in the quarters to come. These forecasts showed that Citigroup Inc. (NYSE:C) is most likely going to repurchase $1 billion of its common shares in each quarter of 2015. Keeping all this in mind, it is no shock that Deutsche Bank (NYSE:DB) increased the price target it had set for Citigroup Inc. (NYSE:C) from $51 to $54. It incorporated an additional 9% increase after the market closed on Tuesday.
Though for investors, this may not be that much of an upgrade. Keeping all matters in mind, even though Citigroup Inc. (NYSE:C) may be in a better position of wealth distribution now since the last year; it is still underperforming in a few places where there is no competition. This may be a major factor causing resistance from potential Citigroup Inc. (NYSE:C) investors who wish to hold the stock.
Citigroup Inc. (NYSE:C)’s Q4 results showed an EPS of $0.06 which was $0.03 below Wall Street expectations. This deviation was blamed on the one time repositioning and legal charges with weakness in Citigroup Ins. (NYSE:C)’s securities business. However, the latter part was witnessed by almost every global money bank in Q4.
The problem at hand is definitely the decline of 4% dollar deposits with a 1% decline in dollar loans. This is clearly not a good sign, as loans and deposits bring food to the table for money banks. Hence this decrease is causing Citigroup Inc. (NYSE:C) a strain in its performance.
On the other hand, the company is definitely gaining potential from emerging markets. The company may be exposed to the rising U.S. dollar value and various other weaknesses while exploiting opportunities in the emerging European countries.
Investors may want to wait for Citigroup Inc. (NYSE:C)’s banking operations to improve before investing. Even with all the opportunities the company is exploiting, it may want to do something to improve the overall performance and outshine competition. At this moment, it would be better to wait and watch.
