Magazine article American Banker

Citigroup Wins 'Buy' Grade for Global Expansion Plan

Magazine article American Banker

Citigroup Wins 'Buy' Grade for Global Expansion Plan

Article excerpt

Citigroup Inc.'s potential to increase earnings by putting more energy into faster-growing markets outside the United States won it an upgrade Wednesday.

Richard X. Bove of Punk, Ziegel & Co. upgraded Citi's shares to "buy" from "market perform," writing that "the time has come to focus on the opportunities facing Citigroup."

The stock "is so discounted that it recognizes none of this company's opportunities," the analyst's note continued. "It should be bought."

The $1.3 trillion-asset company recently outlined plans to focus more on expansion abroad, though Mr. Bove's note stressed Citi's potential in Asia.

At a Sept. 22 investor conference in Hong Kong, executives called Asia an important part of Citi's global strategy. And a Dow Jones article published that day said the company specifically planned to concentrate on South Korea, India, and China.

Citi's Asian operations, excluding Japan, generated 12.2% of the company's $5 billion of second-quarter profits; over all its international operations generated 39.7% of the quarter's profits, Citi reported. Last year the company ran afoul of regulators in Japan, and it is reportedly close to leaving Japan's private banking business.

Mr. Bove's report said Asia "dwarfs" Citi's current markets.

"Large companies usually face saturated markets," it said. "Companies with small market shares usually have limited products and systems. In this instance, a dominant company has the opportunity to penetrate a huge market."

Joseph Dickerson, an analyst at Atlantic Equities LLP in London, agreed that the key for Citi will be its "global footprint. …

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