Is Citigroup A Good Bank Stock for 2013?

Page 1 of 2

After a 21% rise in the stock price in the last month, bringing it to the point where it is up 47% from a year ago, Citigroup Inc. (NYSE:C) ended up showing strong returns in 2012. Going into 2013, there is still a value case to be made in terms of some common value metrics. The bank still trades at a sizable discount to the book value of its equity at a P/B of 0.7; while we don’t think that Citi’s assets are particularly reliable, and the company remains exposed to conditions in Europe, this may be too low a ratio. Consensus 2013 earnings imply a current-year P/E of only 9, and the five-year PEG ratio comes out to 1. So if Citigroup Inc. hits its earnings targets it would likely be undervalued; even if it misses slightly the current price would be about right. A number of value investors have been taking notice of the stock’s value, and at the end of the third quarter Citi was one of the most popular stocks among hedge funds (see the ten most popular stocks). With the breadth of hedge fund interest generally not changing dramatically, we’d guess that it’s still one of the most popular stocks about three months later.

David Tepper

Billionaire David Tepper was one of the hedge fund managers who liked Citi in the third quarter of 2012, increasing Appaloosa Management’s stake by 10% to a total of over 10 million shares. Citigroup Inc. was one of the largest holdings in Appaloosa’s portfolio (find more of Tepper’s favorite stocks). Moore Global, which is managed by billionaire Louis Bacon, initiated a position in Citigroup during the quarter (check out Bacon’s stock picks) and large hedge fund D.E. Shaw was also buying shares of the bank (research more stocks that D.E. Shaw likes).

Citigroup’s revenue was down sharply in the third quarter of 2012 compared to the same period in the previous year; while net interest revenue declined only slightly non-interest revenue dropped 77%. As a result net income for the quarter came in much lower. Book value per share increased 5%, so while most of the increase in the share price has come from a higher P/B ratio there has been some improvement on the balance sheet as well.

Two other large banks currently trading at discounts to book value are Bank of America Corp (NYSE:BAC) and JPMorgan Chase & Co. (NYSE:JPM). The P/B is at least close to 1 in JPMorgan Chase’s case, but Bank of America is valued about 40% lower than book by the market. That bank does have a reputation for being too much of a financial supermarket, and its P/E for 2013 is 12; with net income down even more there than at Citi we think that we would pass. JPMorgan Chase’s P/E is 9, so it actually matches Citi on that metric and has only a slightly higher P/B ratio. We would consider JPMorgan Chase to be a more stable bank, and in its most recent quarter revenue and earnings were up from a year earlier, so we would say that it is a better buy.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

50 Crazy Facts About Japan You Won’t Believe

Top 10 Least Expensive Hybrid Cars to Save the Planet With

The 10 Biggest ‘Gate’ Controversies in History

The 10 States with the Highest Nursing Shortages Leaving Their Hospitals Depleted

The 10 Best Value Investment Blogs that Every Investor Must Read

The 6 Cheapest Boarding Schools in Europe 2015

The 5 Most Expensive Cars To Insure in the World

The 10 Most Common Genetically Modified Foods

10 Self-Made Billionaires Who Came From Nothing

The 10 Most Expensive Cities to Live in North America

The 13 Most Expensive Headphones in the World to Represent

The Top 20 Wealthiest Soccer Teams in 2014

4 BuzzWorthy Cannabis Stocks And Some Smoking Derivative Plays

The 10 Healthiest Fast Food Chains in America to Dine At

The 5 Most Expensive Cat Food Brands You Can Spoil Your Kitty With

The 6 Best eCommerce Platforms for Small Businesses

The 10 Worst Mistakes an Entrepreneur Can Make

The 5 Most OP Characters in League of Legends to Carry Games and Crush Foes With

The 5 Best Foods to Eat Before Running that Will Help You Pound the Pavement

10 Glaring Plot Holes in The Walking Dead that a Zombie-Filled Bus Could Drive Through

The 5 Biggest Celebrity Stoners Who Love Their Reefer

The 10 Most Overrated Movies Of All Time by Out-of-Touch Critics

Top 6 Least Expensive Cruise Destinations For 2015 that Will Take You to Paradise

10 States with Lowest Substance Abuse Rates in America

The 14 Most Watched TV Finales Ever

The 10 Best Selling Role Playing Games of All Time for PC

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

How to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

Top 15 Billionaires in 2014

5 Pitfalls To Avoid When Buying a Franchise

Top 20 Medical Schools in the US – 2014 Rankings

4 Business Strategies that Turned Jamie Oliver into the World’s Richest Chef

6 Qualities That Make You A Good Team Player

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!