November 19, 2007

The dwongrades of CITI keep coming

Wall Street Market blog has compared a Goldman Sachs analyst and CIBC analyst take on Citi (C). Both reports arrive at a similar conclusion, surprise ...surprise.

The recent analyst recommendation on C (Source:Market Watch) is 6 buys and , well, 11 sells (8 hold, 3 outright Sell).

Many called for the breakup of C as it has gotten too big. The problem is not being too big, it is being too big for the sake of being big. C has been put together by a series of acquisitions by Sandy Weill with the vision of creating a huge organization that will allow for cross selling and back office synergies.

The problem with C is the lack of vision and lack of a strong competitive advantage. The bank has great assets, particularly its global network. Its international assets will harvest great returns due to emerging market solid economic activity and growth. What C ought to do is leverage its US assets and financing to enhance returns oversees primarily.

What C needs is strong leadership from the top that needs to refocus the organization and rally it around a vision for the next 5 years. The last 5 years the bank went floundering in every direction and now it is paying the price.

The bank can be an excellent value idea but it depends on its strategy and leadership. It has solid asset base to leverage and maximize returns. It will be interesting to see who will take the helm at C and what he/ she will do.

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