Citigroup Eyes Fannie Mae and Freddie Mac Stock Offerings for Strategic Expansion

Citigroup CEO Jane Fraser met with former President Trump to discuss potential public stock offerings for Fannie Mae and Freddie Mac. Analysts predict an 11.12% increase in Citigroup's stock price, with an average price target of $102.48. However, GuruFocus' GF Value estimates a potential downside of 33.41% from the current price of $92.23, highlighting valuation discrepancies.

Citigroup CEO Jane Fraser recently met with former President Trump to discuss potential public stock offerings for Fannie Mae and Freddie Mac. This meeting is part of a series of discussions held by Trump with Wall Street executives to explore the privatization of these mortgage giants.

According to sources familiar with the matter, Fraser and other Wall Street bank executives, including those from Goldman Sachs, JPMorgan Chase, Bank of America, and Wells Fargo, have been pitching the president on the idea of releasing Fannie Mae and Freddie Mac from government conservatorship. The discussions have revolved around the potential structure of a public offering and how the banks could value these organizations [2].

Fannie Mae and Freddie Mac are integral to the U.S. housing market, purchasing mortgages and repackaging them as securities. Their government conservatorship began during the 2008 financial crisis when mortgage defaults soared, and the U.S. Treasury Department injected over $180 billion into the mortgage lenders. The privatization of these entities could mean one of the world’s largest public offerings, potentially generating billions in revenue for the stock underwriting desks of these big banks [2].

Analysts predict an 11.12% increase in Citigroup's stock price, with an average price target of $102.48. However, GuruFocus' GF Value estimates a potential downside of 33.41% from the current price of $92.23, highlighting valuation discrepancies. This discrepancy suggests that investors should closely monitor the developments surrounding the privatization of Fannie Mae and Freddie Mac, as it could significantly impact Citigroup's stock performance [3].

The privatization of Fannie Mae and Freddie Mac is not without controversy. Democratic politicians, civil rights organizations, and some housing experts have raised concerns about the potential impact on affordable credit in the housing market. They argue that stricter lending requirements, higher interest rates, and even higher guarantee fees could result from a privatized system [2].

Republicans, including many Trump allies, argue that the government backing of Fannie and Freddie was never intended to be permanent and that loosening its grip over these entities would promote better competition in the mortgage market. They also claim that the government selling its stakes in these companies could generate billions that could be used to reduce the deficit and return money to taxpayers [2].

The privatization of Fannie Mae and Freddie Mac is a complex issue that involves multiple stakeholders. The potential impact on Citigroup's stock performance and the broader housing market will depend on the outcome of these discussions and any subsequent legislation or regulatory changes.

References:
[1] https://www.nasdaq.com/articles/citigroups-nii-rises-y-y-1h25-will-momentum-continue
[2] https://finance.yahoo.com/news/citi-bank-of-america-ceos-join-the-parade-to-pitch-trump-on-taking-fannie-freddie-public-125706168.html
[3] https://seekingalpha.com/news/4480533-citi-ceo-fraser-meets-with-trump-to-pitch-fannie-mae-freddie-mac-offerings---report