Oppenheimer analyst Chris Kotowski reiterated an Outperform rating on Citigroup, Inc.
Citi remains one of the cheapest banks in the analyst's view, at 0.59x tangible book value.
The company recently reported a second-quarter FY23 net revenue decline of 1% year-over-year to $19.44 billion, beating the consensus of $19.27 billion. EPS was $1.33, above the consensus of $1.30.
The analyst notes that these results closely reflect underlying operating trends, although there were $306 million of reserve builds, some minor special items, and an unusually high tax rate.
While trading NII, which is inherently volatile, bumped up $0.5 billion and accounts for most of the beat, the underlying NII was also solidly above expectations, notes the analyst.
Profitability may be anemic in the quarter, as noted, but even so, the trailing six quarters' average earnings were $3.4 billion, the analyst adds.
Citi completed a billion dollars of share buy-backs this quarter, bringing the total decline in the share count since 2015 to 35%.
Citigroup expects FY23 adjusted revenue of $78 billion - $79 billion vs. consensus $78.86 billion.
Given the guidance, the analyst suggests that 2024 is a mystery, although presumably, it inflects upward towards their 11-12% ROTCE target.
Every ROTCE point improvement is about $1.6 billion in incremental net income, Kotowski added.
Thus, the potential to shrink the share count is enormous, and this is why the analyst thinks that shareholders will ultimately be rewarded for their patience.
Price Action: C shares are trading higher by 1.39% to $46.39 on the last check Monday.
