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Citigroup Inc Displays Mixed Prospects: Time to Hold the C Stock?

As bank stocks rise on Trump enthusiasm, C may be ready to prosper

   

The anticipation of another Fed rate hike and the impending implementation of Trump measures have led banking stocks to rally. Citigroup Inc (C) is one such stock. Though the company exhibits mixed prospects for revenue growth, cost-saving initiatives are expected to support bottom-line growth.

Citigroup Inc Displays Mixed Prospects: Time to Hold the C Stock?However, strict regulations and litigation issues remain concerns.

Expense management and streamlining operations internationally aided the company to surge 46.9%, compared with the 48.5% growth for the Zacks categorized Banks-Major Regional industry.

However, the company’s earnings estimates have revised slightly downward, for the current year, over the last 30 days. As a result, the stock carries a Zacks Rank #3 (Hold). Although Citigroup’s underlying franchises of the consumer businesses have remained strong, net interest margin (NIM) has remained under pressure for the past several quarters.

Though the company is likely to benefit in a rising rate environment, the near-term outlook remains bleak.

For 2017, management projects NIM to remain largely flat at about 286 basis points, as improvement in the core franchise offsets the persistent decline in the company’s legacy holdings portfolio. Notably, the guidance does not assume any additional rate hikes in 2017.

Revenues recorded a CAGR of 3.3% over the four-year period (2012–2015). Though revenues declined in 2016, the bank is expected to record significant growth in revenues in the near term, with consistent economic recovery and focus on core operations with strategic actions. Notably, management projects consistent growth in net interest revenue in 2017, with about $500-million impact from the Dec 2016 rate hike and a $900-million benefit from loan growth and mix, including the impact of card investments maturing in second-half 2017.

Citigroup has been emphasizing on growth in core businesses through expense management and streamlining operations internationally. For instance, in North America Consumer banking, the company launched ‘enhanced retail segmentation strategy’ during fourth-quarter 2016.

Further, in its Mexico consumer franchise, the company intends to improve operating efficiency and returns, and remains on track with the $1-billion investment program which is expected to be complete by 2020.

Additionally, ongoing investments in branded cards support the company’s growth strategy.

Additional Bank Stocks to Consider

Bank of America Corp (BAC) has been witnessing upward estimate revisions for the last 60 days. Further, the stock surged over 59.3% over the past six months. It currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

U.S. Bancorp (USB) has been witnessing upward estimate revisions for the last 60 days. Also, the company’s shares have risen nearly 26.1% over the last six months. It currently carries a Zacks Rank #2.

Enterprise Financial Services Corp (EFSC) has been witnessing upward estimate revisions for the last 60 days. Over the last six months, the company’s share price has been up more than 39%. It carries a Zacks Rank #2.

Zacks’ Top 10 Stocks for 2017

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U.S. Bancorp (USB): Free Stock Analysis Report

Citigroup Inc. (C): Free Stock Analysis Report

Bank of America Corporation (BAC): Free Stock Analysis Report

Enterprise Financial Services Corporation (EFSC): Free Stock Analysis Report

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