Fraser曾是麦肯锡的合伙人，在2004年加入花旗之前，她帮助金融公司解决自身问题。现在，她的工作压力巨大。“我们怀疑，如果她不能在相对较短的时间内展现出实质性进展，她将被迫下台，为能够带来进展的人腾出位置。”Oppenheimer分析师Chris Kotowski在周五的一份客户报告中写道。Citigroup's Q4 Earnings Reports will be released on January 15, presenting an opportunity for CEO Jane Fraser and her team to update investors on the company's recovery efforts.
As the fourth year of serving as the CEO of Citigroup approaches, Wall Street analysts have informed investors that they have high expectations for Citigroup (C.N) stocks. Some bank analysts have listed it as their preferred stock for 2025 or included it in their list of top stocks.
However, they add an asterisk to these optimistic predictions. Various variables, including ongoing efforts to resolve regulatory issues and uncertainty about the impact of the incoming government agenda on banks, still exist.
Fraser was a partner at McKinsey and, before joining Citigroup in 2004, helped financial companies solve their issues. Now, she is under immense pressure. "We suspect that if she cannot demonstrate substantial progress in a relatively short period, she will be forced to step down, making way for someone who can bring about that progress," wrote Oppenheimer analyst Chris Kotowski in a client report on Friday.
Kotowski gave Citigroup a "Outperform" rating and called it one of his favorite bank stocks. However, he now hopes to see updates, especially regarding Citigroup's mid-term target set in 2022, which aims for a Return on Common Equity (ROTC) of 11% to 12%. Citigroup indicated that this key earnings metric stood at only 4.9% for 2023.
Kotowski wrote, "Expectations remain low, and now is the time to show progress," as this target has entered its third year. For the third quarter of 2024, Citigroup's ROTC was 7%, while similar figures for JPMorgan (JPM.N) and Bank of America (BAC.N) were 19% and nearly 13%, respectively.
Meanwhile, Citigroup stocks are currently trading below their actual book value, which is rare among large banks, indicating that Fraser has yet to convince investors that her recovery efforts can succeed.
On Thursday, Mike Mayo, a well-known Wall Street analyst for Citigroup stocks, stated that he has raised Citigroup's 12-month target stock price from $95 to $110. On Friday, Citigroup's stock closed at $71.00, up 1.5%, while the S&P 500 Index rose by 1.3%.
Mayo has previously criticized Fraser's predecessor, Michael Corbat, for the company's performance during his tenure, and he has now listed Citigroup as his top stock pick for 2025. Last month, Mayo stated in an interview that Citigroup is his "most bullish first choice, unmatched by other banks." He noted that despite Citigroup being a popular choice for 2024, its failure to surpass competitors has made the stock even more attractive.
The management reorganization conducted by Fraser is the most significant in fifty years, simplifying the complex structure down to five business areas, Mayo wrote. Her team has proposed a plan to cut 20,000 jobs by 2026. Mayo believes that Citigroup's progress in cost-cutting should exceed expectations, "because Citigroup has already endured the pain ahead of time."
He expects that Citigroup's stock and earnings could double within three years in all cases except for an economic recession. However, over the past decade, Citigroup's stock price has only risen by 30%, while the S&P 500 Index has increased by 185%. Since Fraser took over in March 2021, Citigroup's stock has risen by 8%, while the market benchmark index has increased by 56% and is nearing an all-time high.
What encourages analysts is that Fraser has the potential to achieve the goals that her predecessor could not: to lead the company to a sustained recovery with a new group of leaders and ultimately drive Citigroup's stock price to catch up with its competitors' growth.
Analysts at Keefe, Bruyette & Woods said on Thursday that they have also listed Citigroup as one of their top stock picks for the year. Although the stock is cheap, analyst David Konrad wrote, "we believe that increased activity in capital markets and short-term catalysts like capital management may prompt a reassessment of the PE." His target stock price for Citigroup is $85.
Citigroup's fourth-quarter earnings report will be announced on January 15. At that time, Fraser and her team will have the opportunity to update investors on the company's current status, and analysts are pinning their hopes on her ability to address long-standing efficiency issues.
