Citigroup remains well capitalized with a 11.6% Common Equity Tier 1 Capital Ratio, but there isn’t room to lever up. Management has recently expressed less optimism about reaching its previously stated goal of reaching a 13.5% ROTCE in 2020, and the market consensus has them coming up short of the same goal. Operating leverage has helped the bank improve this metric by several percentage points in the past few years, but it appears that the cost-cutting road is getting increasingly difficult. Now more revenue dependent in improving its return metric, this leaves the bank also counting on the 11-year economic upcycle to continue. It is therefore unsurprising that this bank trades right near its tangible book value of $69.03 per share. Our fair value estimate remains $71 per share.
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