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Citigroup shares seen doubling by 2020 on capital returns
[NEW YORK] Citigroup Inc's share price could double in the next four years as the lender simplifies its businesses and returns more capital to shareholders, Portales Partners analyst Charles Peabody said.
"Citi could be a US$90 stock by 2020 given the kind of capital they're going to retire," Mr Peabody said Monday in an interview on Bloomberg Television.
Citigroup and other large banks have built "massive amounts of capital" after selling businesses and assets to meet regulator demands in the wake of the financial crisis, Mr Peabody said. New York-based Citigroup will be in a better position to return that surplus to shareholders after 2017, he said.
"Once we get past '17, you're going to see a tremendous amount of capital returned by these money-center banks," he said. "They're going to add 4, maybe even 5 percentage points" to their earnings-per-share growth rate.
Citigroup's shares climbed 0.6 per cent to US$45.64 at 10:21 am in New York.
Separately, loan losses tied to energy will continue to rise, Mr Peabody said. Lenders will need to build reserves of as much as 15 per cent for cumulative losses over the next two years, he said. Global banks typically have reserves of 5 per cent, while their regional counterparts set aside about 9 per cent, he said.