Executing well, remains undervalued
Citigroup has announced an increase in its financial targets with the most important being the 50bp increase in its 2020 RoTCE target to 13.5%. As part of this, management also provided a clearer pathway to an efficiency ratio of 53% in 2020, implying ~200bp of improvement in 2019 and 2020. This is considerably faster than the market anticipated. We have adjusted our forecasts such that we reach a ratio of 54.0% in 2020. This adds ~1.5% to our FY19 EPS and ~3% to our FY20 EPS while leaving room for further upside if management continues to execute well against their stated plans. Importantly, C continues to trade at ~1x TBVPS despite a much clearer line of sight to an ROTE of 12.5% in 2020. With total shareholder returns of ~10% pa and the likelihood of a multiple uplift, we reiterate our Overweight recommendation.Citigroup is a financial services holding company whose businesses provide consumers, corporations, governments and institutions with a range of financial products and services, including consumer banking and credit, corporate and investment banking, securities brokerage, trade and securities services and wealth management. The company operates via two primary business segments: Global Consumer Banking, which provides banking services to retail customers through retail banking, Citi-branded cards and Citi retail services; and Institutional Clients Group, which includes banking and markets and securities services.
Formed in 2003 by an established team from Cazenove, one of the most respected investment banks in the UK, Atlantic Equities conducts and publishes fundamental, bottom up research on mid and large cap US companies.
Atlantic provide order execution through a wide range of DMA products and algorithmic trading suites.
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