From Barron's Hot Research:
The banking giant's international consumer business is surging.
Citigroup (C: NYSE)
By Sandler O'Neill & Partners ($4.19, Nov. 18, 2010)Also at Hot Research:
CITIGROUP REMAINS A CHEAP stock despite significant year-to-date outperformance.
Despite being up 27% year-to-date versus a 4% increase in the S&P Banking Index, Citigroup (ticker: C) is still trading at 0.9 times current tangible book value (TBV) and 0.8 times our 2011 TBV estimate of $5.21 per share.
[We rate Citigroup at Buy with a 12-month price target of $5.50.]
TBV is real, capital levels are strong, and both continue to grow. We continue to see significant excess risk-based capital generation potential despite increased Basel III requirements and expect a $3.8 billion TBV boost from Abu Dhabi share issuance in 2011.
Citigroup's international consumer business continues to grow and should command a premium valuation. Citigroup's Emerging Market Consumer Bank is large ($3.1 billion year-to-date net income), profitable (26% net margin), and growing (11% year-to-date loan growth).
Don't mistake management's theme of "leverage the global platform" as the same old song and dance. While not a new strategic theme, there is a new management team working on execution, and evidence to date suggests it is delivering.
Institutional under-ownership creates a large incremental buyer. Recent 13-F filings show that institutional ownership has doubled year-to-date but remains very low relative to peers and still leaves more than sufficient institutional net buying capacity to absorb remaining U.S. Treasury share sales.
-- Jeff Harte
-- Ted Holzman
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