Citigroup: A Prime Value Investment Opportunity After Market Dip

If you’re searching for investment opportunities following the recent Stock market dip, Citigroup (NYSE: C) stands out. Currently, the bank trades at a 27% discount to its tangible book value, creating an attractive opportunity for value investors.

Under the leadership of CEO Jane Fraser, Citigroup aims to enhance efficiency and achieve strategic long-term goals. The bank recently posted solid first-quarter earnings, and with shares priced below $70, it appears to be a compelling buy for investors focused on value. Here’s why.

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Citigroup is Undergoing a Significant Transformation

As one of the largest banks in the United States, Citigroup has struggled to keep pace with its competitors. The bank’s extensive operations and past regulatory issues, including fines for longstanding deficiencies, have contributed to its underperformance on key return on equity metrics.

Jane Fraser took charge in 2021 with a mission to revitalize Citigroup. To combat poor performance and compliance challenges, she made the bold decision to reduce bonuses for senior leaders, decrease management layers, and prioritize core business functions. The bank has since hired thousands of dedicated staff and reduced its dependence on IT contractors to address regulatory scrutiny.

In its first-quarter report, Citigroup surpassed analysts’ revenue and earnings forecasts. According to Fraser, “services recorded its best first-quarter revenue in a decade,” resulting in a net income of $4 billion, which reflects a robust year-over-year growth of 21%.

One critical metric that Fraser aims to improve is the return on tangible common equity (ROTCE). This measure assesses the bank’s efficiency in utilizing capital to generate profits, specifically focusing on tangible common equity without including goodwill and intangible assets. Fraser’s goal is to elevate this figure to a range of 10% to 11% by next year. Progress is being made, with the ROTCE increasing to 9.1% in the recent quarter from 7.6% a year prior.

Image source: Getty Images.

Market Volatility May Impact Revenue Streams

A potential challenge for Citigroup lies in a sluggish recovery of the capital markets anticipated in 2025. Investment banks had anticipated a relaxation of stringent regulations under the Trump administration, which would increase advisory revenues. However, the current administration is likely to maintain strict deal guidelines established during the tenure of former FTC chair Lina Khan.

Market conditions could also hinder initial public offerings (IPOs), as companies prefer to launch when market stability is present. The current market lacks this stability and faces considerable policy uncertainty regarding tariffs and the effects on global supply chains.

Despite these concerns, Citigroup had a strong quarter, reporting a 12% year-over-year revenue increase. The bank benefited from growth in advisory fees related to mergers and acquisitions, although a decrease in equity and debt underwriting activity was noted as market participants navigated substantial economic uncertainty.

Citigroup Stock Trading at a Deep Discount

Citigroup is set on streamlining operations and concentrating on more profitable core businesses. The bank aims to spin off its Banamex retail banking division by year-end, though CFO Mark Mason cautions that securing regulatory approvals might extend this timeline into 2026.

C Price to Tangible Book Value data by YCharts

Citigroup’s stock continuously trades at a discount. The recent market volatility has brought the stock price down to 0.73 times its tangible book value (P/TBV), equating to a 27% discount. In contrast, competing banks Wells Fargo and Bank of America trade at 1.61 and 1.41 times tangible book value, respectively.

This attractive valuation presents significant growth potential for Citigroup, provided the bank successfully implements its turnaround strategies. Earlier in February, Citigroup was priced at 0.95 times its tangible book value, meaning that the latest sell-off offers investors a chance to acquire shares at a significantly lower valuation.

Is Now the Right Time to Invest in Citigroup?

Before proceeding to purchase Stock in Citigroup, consider the following:

The Motley Fool Stock Advisor analyst team has highlighted what they believe are the 10 best stocks for investors to target right now, and Citigroup was not included. The stocks that made the cut show potential for significant gains in the years ahead.

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Bank of America, Wells Fargo, and Citigroup are advertising partners of Motley Fool Money. Courtney Carlsen has no positions in any of the stocks mentioned. The Motley Fool recommends Bank of America. They have a disclosure policy outlined on their website.

The views and opinions expressed herein are solely those of the author and do not necessarily represent those of Nasdaq, Inc.