Citigroup Inc (C) Is Cheap: Belpointe Asset Management

Citigroup Inc (NYSE:C) kick started the week by posting larger-than-expected earnings for its second quarter, which helped the equities to rally on the day. In the meanwhile, the bank has also said that it has accepted to settle nearly $7 billion of towards the faulty mortgage-backed securities that it sold during the financial crisis. As the latest events unfold at one of the largest U.S. bank, CNBC tried to take views from its contributor Michael Farr and Belpointe Asset Management’s Chief Strategist, David Nelson, to know if Citigroup Inc (NYSE:C) could be a ‘Buy.’

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Farr said that though he is bearish over the banking sector, he believes that the negative news surrounding the Citigroup Inc (NYSE:C)  is already priced in. ”This stock is selling at a 15% discount to tangible book value, so it’s not overvalued. You just got seven billion problems out of the way,” Farr said. Overall, he considers that the current valuations are moderate, which makes it a good time to enter the stock.

At the same time, Nelson also supports Farr’s views as he said that Citigroup Inc (NYSE:C) valuations are not high; rather they are cheap as it is trading below 15%. But, Nelson raised some concerns with respect to the bank’s net interest income. He said that when we take into account the bank’s net interest income, it appears to be stabilizing on a year-over-year basis. But, “when you drill down, and you see that the loan provision are declining each and every quarter that’s a red flag. Consequently, Nelson said that the numbers would have turned out pretty worse if they had kept the loan provisions steady.

Having said that, Nelson is still not convinced about the growth in the banking sector. He explained that firstly, the banking regulations like Dodd-Frank act are way too stringent for the banks and secondly, all the opportunities of generating profits for these banks are being cut off.


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