One of the nation’s most maligned banks is working its way back into Wall Street’s good graces.
Citigroup, which tapped Michael Corbat to be CEO after the ouster of Vikram Pandit, has been upgraded by Wall Street pundits who are betting that shares of the lumbering financial giant are poised to rally.
The cheerleading boosted Citi shares 2.51 percent yesterday to a 52-week high of $42.43.
Since the bank installed Corbat in October, Citi’s shares have been on a tear and are up nearly 14 percent. The firm’s relatively new boss has already announced moves to shrink the sprawling bank and focus on more-profitable businesses.
Goldman Sachs analyst Richard Ramsden gave investors more reasons to cheer yesterday by adding Citi to the bank’s so-called conviction buy list. He said the stock is undervalued and predicted Citi could hit $50 in the next 12 months.
“We believe shares are mis-priced given the company’s earnings power, especially considering further restructuring could result in an 11 percent [return on tangible common equity],” wrote Ramsden in a note to clients.
Indeed, Corbat, who is considered an operational whiz, has embarked on a sweeping cost-cutting initiative at Citi that holds out more hope for shareholders.
Last month, Corbat announced plans to slash the bank’s 260,000 global head count by 11,000 jobs and exit a number of ancillary markets in Paraguay, Uruguay, Pakistan and Romania. The measures are expected to save Citi some $1.1 billion in pre-tax earnings.
“We find valuation compelling for Citi even after 2012’s strong performance. We are increasing our 12-month price target to $49 from $42 as we roll forward our earnings multiple from 2013 to 2014,” Ramsden wrote in a report yesterday.
Deutsche Bank analyst Matt O’Connor echoed those sentiments in his own note to clients yesterday, raising his 12-month price target for the bank to $46, from $40.
O’Connor is banking that Citi will be able to benefit from an improving housing market and home loan growth.
Under Chairman Michael O’Neill, Citi’s board shocked Wall Street and a number of its own executives in mid-October when it announced that Pandit was being pushed aside in favor of Corbat.
Sources said that Pandit, who had run the bank since late 2007 during a turbulent period for Wall Street, had lost O’Neill’s support.