What happened
Shares ofCitigroup (C -3.09%) fell nearly 24% during the first six months of 2022, according to data provided by S&P Global Market Intelligence. The bank struggled along with the broader sector but also ran into hiccups amid its multiyear transformation plan.
So what
Since Jane Fraser took over as CEO of Citigroup in early 2021, the bank has been working on a multiyear transformation plan to correct regulatory issues, modernize parts of the bank, and try to boost returns, which have disappointed for years.
While the plan has promise, it has not come without issues. While exiting its consumer-banking operations in many international markets, Citigroup has had to take write-downs. In Russia, the bank is working to sell its consumer-banking operations but may not be able to because of Russia's ongoing invasion of Ukraine.
At the bank's highly anticipated Investor Day in February, investors were not impressed when management promised a medium-term return on tangible common equity (ROTCE) of 11% to 12%, which is still far below the targets of its large-bank peers.
Most recently at the end of June, the Federal Reserve released the results of its annual stress testing, and Citigroup performed worse than expected, which means the bank will face higher regulatory capital requirements starting in 2023. This will make share repurchases for the remainder of 2022 difficult because Citigroup needs to build capital to reach its new capital requirements.
Now what
Investors sold stocks intensely in the first half of the year, so mistakes by individual companies were exacerbated. The market left little margin for error as it battled high inflation and prepared for a looming recession.
Citigroup currently trades at a huge discount to its tangible book value (TBV), or net worth, at just 58% of TBV. While some believe the stock is a value trap, I think management is finally heading in the right direction. The bank is heavily investing to fix regulatory issues and modernize its operations, while also investing in businesses that already perform well.
Selling the international consumer-banking operations, including in the bank's highly profitable Mexican subsidiary, Citibanamex, has been a messy process. But it should pay off by freeing up capital and potentially lowering Citigroup's regulatory capital requirements.
In the first quarter of the year, the longtime bank investors Warren Buffett and Berkshire Hathaway took a new position in Citigroup for the first time since 2001, hinting that they too feel Citigroup is on the right path. This may be a multiyear story, but I do think Citigroup is a buy and has lots of upside ahead.
Citigroup is an advertising partner of The Ascent, a Motley Fool company. Bram Berkowitz has positions in Citigroup and has the following options: long January 2024 $80 calls on Citigroup. The Motley Fool has positions in and recommends Berkshire Hathaway (B shares). The Motley Fool recommends the following options: long January 2023 $200 calls on Berkshire Hathaway (B shares), short January 2023 $200 puts on Berkshire Hathaway (B shares), and short January 2023 $265 calls on Berkshire Hathaway (B shares). The Motley Fool has a disclosure policy.
FAQs
Citigroup shares fell after it reported higher fourth-quarter charges than previously anticipated linked to its exposure to Argentina and Russia, as well as its restructuring. Citi said it set aside $1.3 billion in reserves to cover its exposure to Argentina and Russia.
Why is Citigroup failing? ›
One cause of Citi's problems is foreign loans to questionable governments. For example, Citigroup (C) admits to losing $880 million when they devalued the Argentine peso in the fourth quarter of 2023. Similarly, Citi has a $1.3 billion transfer risk associated with Russia and Argentina.
Why is Citi so undervalued? ›
Wachenheim recently told Barron's, “We strongly believe that Citigroup's shares are deeply undervalued because the bank and its management are much better and stronger than their reputations.” Wachenheim went on to say, “We hear from a number of sources that Jane Fraser is doing an excellent job as Citi's relatively ...
What price did Warren Buffett buy Citigroup? ›
The investor owns 2.92% of the outstanding Citigroup stock. Warren Buffett acquired their 55.2 Million shares between 2022 and 2023. So far they never sold any shares in the company. The investor's estimated purchase price is $3.41 Billion, resulting in a loss of 0.0%.
Is Citibank in financial trouble? ›
Citigroup posts $1.8 billion fourth-quarter loss after litany of charges. Citigroup posted a $1.8 billion fourth-quarter loss after booking several large charges tied to overseas risks, last year's regional banking crisis and CEO Jane Fraser's corporate overhaul.
What is happening with Citibank? ›
The latest reshuffle finalizes Citi's new structure and is part of a broader goal to trim its global workforce of 239,000 by 20,000 over the next two years. Citi eliminated 1,500 managerial roles comprising 13% of its worldwide leaders, Fraser said as the company released its fourth-quarter results in January.
Is Citigroup too big to fail? ›
Companies Considered Too Big to Fail
The Bank of New York Mellon Corp. Citigroup Inc. The Goldman Sachs Group Inc. JPMorgan Chase & Co.
Is Citi a bad company? ›
Finally, Citibank ranked 10th for customer satisfaction in WalletHub's most recent Credit Card Landscape Report. But despite the company's many positives, it's important to point out that Citibank is not perfect.
Should I sell my Citigroup stock? ›
Citigroup has 7.10% upside potential, based on the analysts' average price target. Citigroup has a conensus rating of Moderate Buy which is based on 12 buy ratings, 8 hold ratings and 0 sell ratings.
Is it good to invest in Citigroup? ›
Is Citigroup stock a Buy, Sell or Hold? Citigroup stock has received a consensus rating of buy. The average rating score is and is based on 42 buy ratings, 27 hold ratings, and 11 sell ratings.
Citi Stock Price Forecast
The average stock forecast for Citigroup Inc (C) in the next 12 months is 67.06 USD. This price target corresponds to an upside of 15.27%. The range of stock forecasts for Citi is 50.5 - 91.35 USD. Based on the ratings of 31 analysts, the consensus recommendation for Citi is Buy.
Does Warren Buffett own Citi stock? ›
Citigroup (C)
Currently, Buffett owns 55 million shares of C, a stake that's valued at approximately $3 billion.
Does Warren Buffett still own Citi? ›
Buffett's Berkshire Hathaway Inc (BRKa. N) , opens new tab made a $3 billion bet on Citi in 2022, lifting its stock and boosting confidence in the Wall Street bank. He remained a top five shareholder as of September 2023, according to LSEG data.
Does Warren Buffett have Citi stock? ›
Despite having sold all of his Wells Fargo (NYSE:WFC) and JPMorgan Chase (NYSE:JPM) shares in recent years, Warren Buffett (Trades, Portfolio) remains a steadfast shareholder in Citigroup, which was his 10th-largest U.S. holding as of year-end 2023.
Is Citibank stock a good buy now? ›
Citigroup has a conensus rating of Moderate Buy which is based on 12 buy ratings, 7 hold ratings and 0 sell ratings. The average price target for Citigroup is $67.17. This is based on 19 Wall Streets Analysts 12-month price targets, issued in the past 3 months.
