Citigroup Stock Is Trading Below Its Intrinsic Value

+7.00%
Upside
62.45
Market
66.82
Trefis
C: Citigroup logo
C
Citigroup

Citigroup’s stock (NYSE: C) has lost 1% YTD, as compared to the 7% rise in the S&P500 over the same period. Further, the stock is currently trading at $45 per share, which is 21% below its fair value of $57 – Trefis’ estimate for Citigroup’s valuationThe bank posted better-than-expected results in the first quarter of 2023, with revenues increasing by 12% y-o-y to $21.45 billion. It was driven by a 23% growth in the noninterest income (NII), partially offset by a 3% decline in the noninterest revenues. While the NII benefited from interest rate hikes and loan growth, the noninterest revenues suffered due to negative growth in investment banking, sales & trading, and investment product categories. On the cost front, the provisions for credit losses increased from $755 million to $1.98 billion. Overall, the net income increased 7% y-o-y to $4.6 billion in the quarter.

The bank’s top line grew 5% y-o-y to $75.3 billion in FY 2022. It was driven by a 15% rise in the net interest income, partly offset by a 9% decline in the noninterest income. In terms of business segments, personal banking & wealth management (PBWM) revenues improved by 4% y-o-y, followed by a 3% increase in institutional client group and legacy franchise segments. Despite higher revenues, the company reported a 32% y-o-y drop in the net income to $14.8 billion, mainly because of an unfavorable build-up in the provisions figure.

Moving forward, we expect the Q2 2023 revenues to follow the same trend as Q1. All in all, we estimate Citigroup’s revenues to touch $79.6 billion in FY2023. Additionally, C’s adjusted net income is likely to remain around $11.7 billion in the year. This coupled with an annual GAAP EPS of $6.22 and a P/E multiple of just above 9x will lead to a valuation of $57.

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 Returns May 2023
MTD [1]
2023
YTD [1]
2017-23
Total [2]
 C Return -4% -1% -24%
 S&P 500 Return -1% 7% 84%
 Trefis Multi-Strategy Portfolio -2% 6% 234%
Relevant Articles
  1. Citigroup Stock Has Gained 23% YTD, Where Is It Headed?
  2. Rising Only Half the S&P’s Gain In 2023, Where Is Citigroup Stock Headed?
  3. What To Expect From Citigroup Stock In Q3?
  4. Citigroup Stock Is Trading Below Its Intrinsic Value
  5. Citigroup Stock Has Growth Potential
  6. Is Citigroup Stock Fairly Priced?

[1] Month-to-date and year-to-date as of 5/17/2023
[2] Cumulative total returns since the end of 2016

 

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