David WilliamsCitigroup Inc.CTOP PICKAug 27, 2004

Citi trades at only 0.6x book value, cheapest among peers, but there may be something wrong with that. Trades at a low 10x PE. Last September, they announced a major restructuring, like cutting jobs and executive layers, and they already dropped many of their international businesses. Wall Street is excited by the many job cuts, but he thinks the growth is questionable. It's the only major bank expected to grow earnings in 2024 at 5.2%. He hopes they make a comeback, but will believe it when he sees it.

Likes the CEO, though the market didn't give her credit for 18 months when she started. Now, she's cutting unprofitable business and expenses. It's becoming lean and analysts are noticing it.

Laggard. Checkered past. Market's not that confident in the stock. CEO is getting good marks in righting the ship. Lots of catchup to the rest of the banks. Lots of risk. He'd need to see more positives before stepping in.

Stock has not been performing well. However, business has opportunity to pickup market share. Believes company has turned corner on performance. Revenue and EPS both up. Growth in institutional and personal banking lines. Currently trading at fair value and would recommend buying. 

He regrets selling positions in MS and BAC and wants to get back in. He does want to sell some of his JPM. Wants to return to MS and GS, because he thinks their stock-trading revenue can excel. As for Citi, their revenues are way down, so he'll pass.

Happy about the news. It's gravy. The CEO finally addressed the low ROE by cutting costs, by cutting five layers of management. She also got rid of most international operations, which he agrees with. He likes her decisions. He'd like to see shares surge.

It boasts the lowest PE among the big US banks and pays almost a 5% dividend. They're cutting costs and bringing in great executives. They're a contrarian bank, lagging its peers this year.

Banks reported their Q2 today, but the market reaction to Citi has been weak, a reaction to the consumer's large credit card balances and trading revenue down 13%.

He just bought it. CITI just hired a gem to run their wealth management division (a former colleague of his). It's the top value name among American banks. 

The large US banks are holding their own, far better than the regionals. Citi is one of the most geographically diverse banks around which offers safety. Still likes it. Pays a 4.4% dividend and trades around 6.5x PE. Trades at a big discount to book value.

It's puzzling that their tangible book value is much greater--nearly double--than their stock price. Something is wrong here. Why?

(A Top Pick Jan 07/22, Down 30%)

Has since sold shares.
Company proving to be a value trap.
Lost patience with company.
Will invest in other companies within sector.