Analyst Erika Najarian from UBS maintained a Hold rating on Citigroup and increased the price target to $100.00 from $89.00.
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Erika Najarian’s rating is based on several factors surrounding Citigroup’s recent announcement regarding the sale of a 25% stake in Banamex to Fernando Chico Pardo. The valuation of this stake, at a discount compared to expectations, suggests that Banamex’s standalone profitability might not be as robust as previously thought. This has raised concerns about the potential impact on Citigroup’s consolidated return on tangible common equity (ROTCE), a key performance metric for the company.
Moreover, while Mr. Chico Pardo’s involvement could enhance confidence and interest in Banamex’s future IPO, there are uncertainties about whether he can significantly improve Banamex’s standalone return on equity (ROE) in the interim. Additionally, the political and regulatory implications of the transaction, given Banamex’s cultural significance in Mexico, add another layer of complexity. These factors combined lead to a cautious outlook, justifying the Hold rating on Citigroup’s stock.
In another report released on September 16, Freedom Capital Markets also downgraded the stock to a Hold with a $108.00 price target.