On Tuesday, BofA Securities analyst Ebrahim H. Poonawala increased the price target on Citigroup (NYSE:C) shares to $95 from $90, while reiterating a Buy rating on the stock. Poonawala's adjustment reflects a cautiously optimistic outlook despite various challenges faced by the bank and its leadership.
The analyst noted that although Citigroup's stock experienced a 33% increase last year, paralleling a 32% rise in the bank index, investor skepticism remains high. This concern stems from doubts about whether CEO Jane Fraser can effectively lead the bank towards improved and sustained profitability.
Several factors contribute to this skepticism, including a regulatory reprimand from the Office of the Comptroller of the Currency (OCC) last summer, financial losses associated with the devaluation of the Argentine Peso, and delays in the planned exit from Banamex.
These issues underscore the complexity of the task ahead for Citigroup's leadership team as they work to correct two decades of mismanagement. Poonawala pointed out that this skepticism is reflected in the Street's Return on Tangible Common Equity (ROTCE) forecast, which suggests that Citigroup may not meet its 11-12% ROTCE target until 2028, beyond the management's goal of 2026.
Citigroup's journey to revitalize its operations and financial performance is closely watched by investors, with the bank's ability to navigate these challenges and meet profitability targets being of particular interest. The revised price target by BofA Securities signals a belief in the potential for Citigroup's stock to appreciate, despite the hurdles that lie ahead.
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