Here's Why You Should Hold Citigroup (C) Stock Right Now
On Jun 2, we issued an updated report on Citigroup C. While the company displays mixed prospects for revenue growth, its cost-saving initiatives and focus on core operations will likely support bottom-line growth. However, litigation issues and muted consumer banking income are a concern.
Shares of the company have appreciated 36.2% over the past six months, underperforming 39.7% growth registered by the industry.
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Nonetheless, the company’s current-year earnings estimate has been revised slightly upward over the last 30 days. As a result, the stock carries a Zacks Rank #3 (Hold), at present.
Citigroup has been emphasizing on growth in core businesses through expense management and streamlining operations internationally. Further, the company continues to optimize its branch network, with focus on core urban markets, improving digital channels and reducing branches. The company is also making investments in several areas to stoke growth. Additionally, the ongoing investments in branded cards support its growth strategy. Such efforts will help boost Citigroup’s profitability and efficiency over the long term.
Though operating expenses flared up slightly in 2020 and first-quarter 2021 due to compensation and benefits and other operating costs, the same was almost stable over the four-year period (2016-2019). Controlled expenses highlight the impact of higher volume-related expenses, and ongoing investments more than offset by efficiency savings and the wind-down of legacy assets. Therefore, such trend in expenses will aid bottom-line expansion.
Citigroup continues to encounter a number of investigations and lawsuits from investors and regulators. Though the company resolved certain litigations related to the sale of risky mortgage-backed securities and other issues, several of these cases are yet to be resolved. As management continues to work through the legacy legal issues, we believe the bank might continue to witness elevated legal expenses and litigation provisions, which will likely hurt its financials.
Though Citigroup’s non-interest income increased in 2020 on stellar market revenues and underwriting business, partly offset by lower consumer banking revenues, it witnessed a five-year negative CAGR (2015-2019) of 2.9%, with some annual volatility. The falling trend was witnessed in the first three months of 2021 as well. Therefore, the coming quarters might disappoint on subdued global consumer banking business due to the continued adverse impact of the COVID-19 crisis.
Stocks to Consider
Fifth Third Bancorp FITB has been witnessing upward estimate revisions for the last 60 days. Further, the stock has surged more than 57.1% over the past six months. It currently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
JPMorgan Chase & Co. JPM has been recording upward estimate revisions for the last 60 days. Also, the company’s shares have risen nearly 37% over the last six months. It carries a Zacks Rank of 2, at present.
Synovus Financial Corp. SNV has been witnessing upward estimate revisions for the last 60 days. In the past six months, the company’s share price has gained 50%. Currently, it sports a Zacks Rank #1.
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