Banking on Citigroup (NYSE:C) stock has turned out to be a bad move. For the year so far, the return of Citigroup stock is an awful -17.3%.
But this has not been a temporary downturn. During the past ten years, C stock has posted an average annual return of -3.27%.
So what’s going on here? And is there hope that Citigroup stock will once again get back into gear?
Citigroup Stock Has Had Multiple Headwinds
The decline of C stock has been caused by a variety of factors. But lately, investors have been worried about Citigroup’s lackluster U.S. consumer credit card business as well as its mortgage segment. And of course, there are concerns about the bank’s global business, which has been weighed down by the Trump administration’s aggressive tariffs.
In the meantime, the Street has been bearish on the entire banking sector. One big reason for that has been the lack of loan growth, as borrowers have increasingly sought to obtain funds from lenders other than banks.
Despite all these headwinds, some big-time investors believe that bank stocks’ valuations are attractive. Just look at Berkshire Hathaway’s (NYSE:BRK.A, NYSE:BRK.B) Warren Buffet. He recently shelled out $4 billion for JPMorgan Chase (NYSE:JPM) stock and also added to his positions in U.S. Bancorp (NYSE:USB), Goldman Sachs (NYSE:GS) and Bank of America (NYSE:BAC).
But he has ignored Citigroup stock.
It’s tough to determine why the Oracle of Omaha is not impressed with C stock. But it may be because Citigroup’s presence is mostly in foreign markets, like Latin America and Asia. Buffett, on the other hand, generally looks at the U.S. as the best place to focus on.
C Stock Has Some Positive Attributes
But hey, he is far from perfect. And for investors looking for a play on international growth, Citigroup stock does look interesting.
Perhaps the most attractive part of Citi’s business is Asia. The company has a diverse footprint on the continent, with operations in China, Japan, Korea, India, Australia, Singapore and Hong Kong. Even though Asia has seen some deceleration in growth, it is still robust. For the year, the continent’s aggregate GDP should increase over 5%.
Meanwhile, Citigroup is also investing heavily in its digital infrastructure, enhancing its apps, data analytics and geolocated card offers. Additionally, it has launched new offerings like CitiDirect BE (a digital corporate payments system) and CitiVelocity (a research and data analytics platform).
The Bottom Line on Citigroup Stock
Citigroup continues to focus on streamlining its operations and reducing its costs. One way it has looked to lower its spending is getting rid of branches in the U.S. But Citi is looking to prevent its customers from being hurt by the move by setting up a digital bank, which looks like a forward-looking idea.
Granted, the company has struggled to grow its top line, as its third-quarter revenue was flat year-over-year. But its profits still are solid. In Q3, its earnings jumped by 12% to $4.62 billion, although its bottom line was boosted by the tax-reform bill this year.
The company also continues to buy back Citigroup stock. In Q3, it purchased 75 million shares of C stock.
What’s more, the valuation of Citigroup stock is fairly cheap right now. Note that the forward price-earnings ratio of Citi stock is 9.6, and the shares trade at a 10% discount to their book value. Citigroup stock also has a decent dividend yield of 2.74%.
All in all, it seems that much of the bad news is already reflected in the Citigroup stock price. So if the company’s growth outlook improves, C stock could finally rebound.
Tom Taulli is the author of High-Profit IPO Strategies, All About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.