By Manya Saini
(Reuters) – Citigroup stock could double in value over the next three years as the Wall Street lender's profits surge, Wells Fargo analysts wrote in a client note on Friday, naming it the brokerage's top pick in the large-cap banking sector.
CEO Jane Fraser undertook a sweeping overhaul in 2024 to improve the bank's performance, cut costs, and streamline its sprawling businesses. As part of the change, Citi plans to cut 20,000 jobs by 2026.
“The significance of Citi's impact from multi-year value destruction to value creation is, in our view, one of the biggest drivers of sustainable stock price outperformance,” said Citi bull Mike Mayo.
Under almost any scenario, except a recession, Citi is the brokerage's “obvious choice.” Wells Fargo raised its price target to $110 from $95, while maintaining its “overweight” rating.
Citi shares rose 1.2% to $70.78 in morning trading.
The third largest US lender is now operating under a new organizational structure as part of Fraser's wider efforts to reduce red tape and boost profits.
Analysts had described 2024 as a transitional year for the bank and said the reorganization represented an inflection point that will increase its efficiency.
Separately, KBW analysts led by David Konrad also raised their price target on Citi to $85 from $82, calling it one of their “best ideas” for 2025.
The bank may benefit from increased capital markets activity, and its reduced valuation compared to peers could present a compelling opportunity for investors, the brokerage said.
Citi trades at a price-to-book ratio of 0.69, a common benchmark for valuing stocks, according to data from LSEG. This compares to JPMorgan Chase's 2.08 and Bank of America's 1.25.
A ratio below one usually indicates an undervalued stock.
The bank is expected to report fourth-quarter and full-year results in mid-January, with all eyes on executive commentary on key growing businesses such as wealth and investment banking in 2025.
(Reporting by Manya Saini and Niket Nishant in Bengaluru; Editing by Sriraj Kalluvila)