Authors: Manya Saini and Niket Nishant
(Reuters) – Citigroup’s stock value could double over the next three years as profits rise, spending moderates and the “most significant” reorganization in five decades improves management accountability, Wells Fargo (NYSE:) analysts wrote in a note on Friday.
The third-largest U.S. lender is the brokerage’s “dominant choice” among large-cap banks in almost every scenario except a recession. The analysts raised their price target to $110 from $95 while maintaining an “overweight” rating.
Citi shares rose as much as 1.6% to $71.09.
The vote of confidence marks a material victory for Citi CEO Jane Fraser, who has been trying to improve the bank’s profitability since taking over in 2021.
Wells Fargo’s Mike Mayo, known for his blunt criticism of the banking industry’s failings, praised Fraser’s sweeping 2024 reforms, which are expected to cut costs and simplify the bank’s extensive operations.
“Investors appear to be underestimating… the increased management responsibility following the move from a 50-year-old global matrix structure to 5 business lines,” said the Citi bull.
Analysts described 2024 as a transition year for the bank and said the reshuffle represents a turning point that will boost efficiency.
Moreover, KBW analysts led by David Konrad also increased Citi’s price target from $82 to $85, calling it one of their “best ideas” for 2025.
Increased capital market activity and Citi’s discounted valuation relative to peers could represent an attractive opportunity, he said.
Citi is trading at a price-to-book ratio, a common benchmark for valuing stocks, of 0.69, according to LSEG data. For comparison, JPMorgan Chase (NYSE:) is 2.08 and Bank of America is 1.25.
A ratio below one usually indicates an undervalued stock.
The bank is expected to announce results in mid-January, with a focus on executive comments on key business growth in 2025.
“Citi’s importance in shifting from multi-year value destruction to value creation is, in our view, one of the most important drivers of sustained share price outperformance,” Mayo said.
