Is Citigroup a Stock to Buy?

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Since March 26, shares of Citigroup (NYSE:C) have fallen 8 percent, with much coming after the U.S. Federal Reserve surprisingly rejected its capital return plan, meanwhile approving the plans of most of its peers. This naturally created some skepticism regarding the overall health of the bank. Still, at below $46.50, shares of Citigroup present a great investment opportunity.

So what does it mean when a capital return plan is rejected for “qualitative” reasons? Reportedly, this means that Citigroup has not improved fast enough for the Fed, or at least with its capital planning process. Granted, this concern is most likely connected to the company’s massive exposure to emerging markets.

With that said, Citigroup is not a growth company but rather a restructuring story, a firm that’s massive and grossly undervalued relative to its assets. In other words, it’s cheap relative to its book value, which is a common and popular way for investors to compare banks and the level of risk associated with these investments. For example, take a look at how Citigroup compares to many of its peers on a book value per share basis.

Company Stock Price Book Value Per Share Price/Book Ratio
Citigroup $47 $65.23 0.72
Bank of America (BAC) $16.70 $20.71 0.81
JPMorgan (JPM) $59.80 $53.26 1.12
Wells Fargo (WFC) $49.50 $29.50 1.68
Morgan Stanley (MS) $30.40 $32.34 0.94

Considering the fact that each of the above five companies operate in the same industry, there is a large disconnect in how each company is valued. Therefore, Citigroup did not get the 5-cent quarterly dividend and $6.4 billion buyback program that was sought, but it does get to keep its 1-cent quarterly dividend and $1.2 billion program. Also, despite it not having the greatest payout among its competitors, it does have the greatest value.

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