Barron's reports on Wednesday's Ira W. Sohn Investment Research Conference in New York. While many different stocks were pitched I thought it was interesting that two speakers presented both sides of the Citigroup Inc. (NYSE:C) investment case. The short case is that Citi shouldn't pay dividends while raising capital and the long case is a $5 EPS forecast for 2009.
Former mutual-fund star Michael Price said Citi was foolish to be paying dividends while raising enormous amounts of capital. He also said that Citi's perpetual preferreds have nowhere to go but down. Rich Pzena of Pzena Investment Management was long Citi because he thinks its earnings power is largely unimpaired and that it could net over $5 a share in 2009 -- making it look cheap at its current $21 a share price.
I would like Pzena to be right. But I find Citi's financial statements to be so complex that I don't understand how he arrived at that $5 a share forecast. Nevertheless, I continue to hold the stock because I think that the pressure to fix Citi is so great that eventually someone will figure out how to do it. I think it should be split into two.
Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter
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Reader Comments (Page 1 of 1)
5-24-2008 @ 12:39PM
alan said...
I think Citi will prove to be a classic B school case study in thr future. the is no successful financial services supermarket model anywhere. People likw to put their eggs in several baskets for real as well as emotional reasons,
So, having said that and the 10 YEARS of this experiment showing mediocre results at best, when does management finally come to the realization and make the appropriate changes.
It has taken GM too long to figure out that they were producing too many similar car lines and have finally begun to rationalize their line-up.
Unfortunately because of stubborn management it took more than a decade and now thry are number two. That opportunity lost will never be recaptured and good luck if you own GM stock
Citi is following the same dumb path. Why is it obvious to everyone except those who work there.
Sure you want to believe, and try to recapture the past glory, but reserecting a 20 year old slogan just wont do it. Citi should be streamlined into three pieces- consumer, investment and corporate.
The three banks are worth a hell of a lot more now and in potential then the unmanageable, bloated mess that exists today. But it takes guts and leadership on the part of the Board and top management to make such changes, and that is sadly lacking.
5-24-2008 @ 6:19PM
bill said...
as far as im concerened citi is a piece of shit. i just opted on of my card when they told me they were going to raise my interest rate by 3.75% even tho the rates have dropped by 3.25%. there genious thinking is because dwe are doing it to everyobne. no late payments or over limits and this is the way they treat their customers. haha bye bye citi and i hope u go down the tubes for ur stupidity. fired one idiot and hired a bigger one to replace him.