Citigroup's Transformation Can Lift the Stock by 30%. It's Time to Buy. -- Barrons.com
By Teresa Rivas From housing to gasoline prices, nearly everything that the 2008-09 financial crisis impacted has bounced back and then some. Then there's Citigroup stock. Citi is the last of the major banks trading below its pre-crisis peak, and it does so by a substantial margin. The company certainly needed a major overhaul, so investor skepticism was warranted. It has since emerged better and stronger, with ongoing improvements likely to further bolster its stock price. The transformation in progress, along with new management and a favorable backdrop, suggest more upside for the stock. The shares only need to trade around 13 times 2027's expected earnings per share -- roughly in line with peers -- to cross the $165 mark. That corresponds to a gain of about 30% from current prices. "Citi has been in a multiyear turnaround plan, and [CEO Jane Fraser] has done a terrific job positioning the firm for a more simplified structure, more focused on returns," says Macrae Sykes, a portfolio manager at Gabelli Funds, which owns the shares. "It appears, with the strategy in place, that Citi should continue to build on its improvement in return on tangible common equity." ROTCE, a "truth metric" for banks, has become increasingly important in recent years, as it strips away intangible assets such as goodwill to help investors get a clearer view of a financial institution's profitability after taxes. Citi's ROTCE has been volatile, and below the 10% investors have tended to expect in recent years. However, consensus calls for it to expand from 7.7% in 2025 to 11.4% this year and 12.2% next year -- levels that demonstrate Citi's continued headway and are typically associated with higher stock prices. Very simplistically, "you're buying something that could be as good as JPMorgan at half the price," says Dave Ellison, a portfolio manager at Hennessy Funds, which owns the stock. At ten times next year's expected earnings and priced at just over one times book value and 1.2 times tangible book value, Citi is the cheapest of t
Dow Jones•2026-10-08 12:41