December 19, 2024 | Premium Service | Earlier this year, Wells Fargo analyst Mike Mayo predicted on CNBC that the price of Citigroup (C) would soar. Citi benefited from the general increase in bank stocks since January and especially the post-election updraft that impacted many banks. Citi even outperformed Bank of America (BAC), which is one of the more problematic banks in the top seven commercial banks by assets.
Source: Google Finance
Despite doubling in market cap since 2023, Citi still traded at a discount to book of just 0.7x. The total return on Citi YTD was almost 50% at the top, decent compensation for long-suffering shareholders, but those gains in financials are ebbing as we noted to readers of the Premium Service. Many analysts are writing long screeds about the heroic restructuring led by Citigroup CEO Jane Fraser over the past 2 and one half years. But sad to say, the operating results for Citi are still not that great and trail the top seven banks.
Below follow our thoughts on Citi as Jane Fraser starts her year of reckoning. Our perspective of Citi is measured in decades and stretches back to the days of John Reed, Sandy Weill and Citibank Private Banking in Mexico City. Soon thereafter began the bank’s adventure in no-doc consumer and residential mortgage lending, rolled out globally. When Stan Middleman started Freedom Mortgage in the 1990s, he sold no-doc loans to Citibank, Norwest and a thrift in Camden, NJ. He told me in "Seeing Around Corners" about the 1990s:
"Citibank became among the top aggregators in the mortgage industry in the 1980s and early 1990s. At the time, I was not very worldly or well-connected in the mortgage industry, but everybody I knew in mortgages in New Jersey was selling loans to Citibank. Why would you do them any other way?"
