Citigroup Price Target Raised to $100 on Restructuring Efforts

Bank of America analyst Ebrahim Poonawala has raised the price target for Citigroup Inc. to $100, reflecting a bullish outlook on the bank's restructuring efforts under CEO Jane Fraser. Poonawala believes that Fraser's strategic initiatives, including divesting international consumer banking franchises and streamlining operations, are positioning Citi for enhanced competitiveness.

Fraser, who took over as CEO in March 2021, has faced significant scrutiny for her overhaul of the bank. However, Poonawala argues that this restructuring is different from previous attempts, citing actions such as balance sheet de-risking, technology and personnel investments, and the hiring of external talent. These moves, according to Poonawala, give Citi a fighting chance to become more competitive.

Citi, with $2.5 trillion in total assets and approximately 229,000 full-time employees, has a history of major overhauls. Previous restructurings occurred after the merger with Travelers in the late 1990s, the 2008 financial crisis, and another restructuring in 2019. Fraser's current initiatives include divesting nearly all of Citi’s international consumer banking franchises, exiting non-core operations, and overhauling leadership. Notable hires include Vis Raghavan, former head of global investment banking at JPMorgan Chase, to lead global banking, Tim Ryan from PwC to lead technology and business enablement, and Andy Sieg from Merrill Wealth Management to head up wealth.

Poonawala's analysis indicates that Citi's five core businesses are showing improved profitability. The analyst expects that, absent a severe macroeconomic shock, Citi's momentum will continue, potentially delivering a return on tangible common equity (ROTCE) of more than 10% on a sustainable basis starting in 2026. ROTCE is a key metric used to evaluate how effectively banks use their tangible common equity to generate profits.

In the first quarter, Citi's efficiency ratio in each of its core business units declined compared to the previous year, reflecting management's focus on controlling expenses. This trend, combined with the strategic initiatives, suggests a positive outlook for Citi's future performance. Poonawala reiterated a "Buy" rating for Citi, underscoring the analyst's confidence in the bank's restructuring efforts and future prospects.