Opinions
Christine Poole
Citigroup Inc.
C-N
DON'T BUY
Sep 15, 2020
Stock price when the opinion was issued
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Financial sector offers great promise, though it's reacted to current markets by pricing in a potential recession. Slower economic growth would not be good for banks. Absent a recession, with consumer confidence returning and unleashing M&A, the sector provides a good opportunity.
A less expensive choice further down the food chain from the likes of JPM.
Likes the valuation of 8x PE, and growing ~24%. Tailwinds from Trump administration with bank de-regulation. Benefiting from years of cleanup and cost cuts. Earnings up 21% in last quarter. Fixed income was up 8%, equities were up 23%.
Yes, the tape can toss you around if we go into a bear market. And yes, this name would sell off along with all the other banks. But at this price, with this level of growth, it's a really good bet on risk/reward. Yield is 3%.
Is the biggest and best of the money centre banks, but trades at 2.2x book value vs. Citi's 0.7-0.8x book. Citi was punished but is under a new CEO. Citi is less exposed to international markets and that volatility. Numbers are showing positive. He likes both. But JPM is fully valued though continues to do good things. The other is a little riskier, but more potential upside.
They reported a big top and bottom line beat, sending shares rallying today. All five segments grew last quarter, led by wealth management (up 20%). Higher costs from their turnaround should decline next year, which the market liked to hear. The CEO is turning things around. Will keep climbing.
Doesn't mind trimming a bit here. Likes the story longer term, especially US banks. If he's correct, financials should do well until late 2027 or first half of 2028. Market's extended, plus expects some sort of negative catalyst in the next couple of weeks. Wouldn't be surprised by a pullback. Big support in low $80s.
If you don't want to be too tactical, just hold and let it run till 2027. If you want to get fancy, trim around 2% and look to get back in on weakness.
New CEO has won back confidence of the street. Solid earnings growth plus expansion of earnings multiples. It was an ordinary company, trading inexpensively, but with a glimmer of hope that it could distinguish itself. And the multiple re-rated upward. Still a very good hold.
She owns JP Morgan in US banks. They just announced a new CEO. They need to spend more on risk monitoring, which is strange so late in the day. This will drag on the recovery on their bottom line, because this spend will weigh on their expenses. Banks on both sides of the border are attractive. She prefers JPM because their managers are strong; they're the cream of the crop among US banks. JPM was very conservative in their provisions in the last few quarters. Will bounce back.