Citigroup Stock Could Tank Another 11%, Analyst Says – TheStreet.com

On Thursday, bank stocks unofficially kicked off the earnings season, with Bank of America (BAC) , JPMorgan (JPM) , Wells Fargo (WFC) and Citigroup (C) all reporting quarterly results before the end of the week. Morgan Stanley (MS) and Goldman Sachs (GS) will join the group by reporting on Tuesday.

But all’s not well for every bank. A lack of volatility has stunted trading revenue at a number of banks, and while some did better than others, we have seen some bank stocks trade lower since reporting.

One of those companies is Citigroup, which was down about 4% in two days of trading since reporting earnings. Shares are down another 85 basis points to $71.50 in early Monday trading, likely thanks to a downgrade by Societe Generale.

Analyst Andrew Lim cut Citigroup stock down to sell and lowered his price target to $65 from $70. Shares recently hit a high near $76. Now trading near $72, a decline down to $65 would represent about 11.3% further downside. Should Citigroup stock fall that far, it will represent a decline of nearly 15% from the highs.

Notably, it will also put the stock below its 50-day moving average and just above its 200-day moving average.

Worth pointing out is the fact that Citigroup beat on earnings per share and revenue estimates for the quarter, growing its sales results by 2.3% year over year. Earnings of $1.42 per share came in 14.5% higher than the same period one year ago.

While these are certainly solid results, the analyst had a less-than-upbeat take. He cites Citigroup’s excess capital returns as one of the only positives, which is now priced in by the market. Group loan loss provisions and net charge-offs both came in worse than expected. He acknowledged that seasonally, this increase is to be expected. Unpredictable events — like hurricanes — don’t help matters. He is also downbeat about the company’s net interest margin projections.

Ultimately, Lim cut his fiscal year 2019 estimates by 11% because of this weakening trend. But he did leave estimates for 2018 unchanged, as higher revenue could offset this issue.

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