Written by Manya Saini and Niket Nishant
(Reuters) – Citigroup shares could double in value over the next three years as earnings rise, expenses moderate and the “most significant” reorganization in five decades improves management accountability. Wells Fargo (NYSE:) analysts wrote in a note on Friday.
The third-largest U.S. bank is the “dominant choice” for large-cap interbank brokerage under almost any scenario, barring a recession. Analysts raised their price target to $110 from $95, while maintaining an “overweight” rating.
Citi shares rose as much as 1.6% to $71.09.
The vote of confidence represents a notable win for Citi chief executive Jane Fraser, who has been looking to improve the bank's profitability since taking over in 2021.
Wells Fargo's Mike Mayo, known as an outspoken critic of the banking industry's missteps, praised Fraser's 2024 overhaul to cut costs and streamline the bank's sprawling business.
“Investors appear to be underappreciating…improved management accountability after moving from a 50-year global matrix structure to five business lines,” Citi said.
Analysts had described 2024 as a transitional year for the bank, and said that the amendment represents an inflection point that will increase efficiency.
Separately, KBW analysts led by David Conrad also raised their price target on Citi to $85 from $82, calling it one of their “best ideas” for 2025.
She said increased capital markets activity and Citi's discounted valuation compared to peers could provide a compelling opportunity.
Citi trades at a price-to-book ratio, a common standard for valuing stocks, of 0.69, according to data from LSEG. This compares to JPMorgan Chase (NYSE:)'s 2.08 and Bank of America's 1.25.
A ratio less than one usually indicates an undervalued stock.
The bank is expected to report its results in mid-January, with an emphasis on executive comments on key business growth in 2025.
“The importance of Citi's shift from multi-year value destruction to value creation is, in our view, one of the greatest drivers of sustained equity price outperformance,” Mayo said.
