Ahead of the Bell: Analyst keeps 'Sell' rating on Citigroup
NEW YORK—Citigroup Inc.'s new management will face challenges as it navigates out of the credit crisis, an analyst said Thursday while encouraging investors to sell shares ahead of a company conference.
Citigroup Chief Executive Vikram Pandit is set to host an investor and analyst day Friday. Pandit took the reins of the New York-based company about six months ago and has moved quickly to replace key executives.
Deutsche Bank analyst Mike Mayo kept a "Sell" rating and expects Pandit and others to outline their strategy, business focus and financial targets.
"While many of the new managers seem talented, we feel that they face a tough task in terms of risks related to capital markets, lending, new equity, revenues, business model and management," Mayo said in a note to clients.
The company has been battered in recent quarters, partly by the ongoing credit crisis and housing market turmoil. Since the third quarter of 2007, Citigroup has posted nearly $38.3 billion in write-downs.
In the first quarter Citigroup lost more than $5 billion and said it would lay off 9,000 workers, the latter move mainly as a cost-cutting measure as most financial institutions have grown increasingly conservative.
The conference will likely show which parts of the company will be shed and just how much management expects to earn in coming periods, Mayo said.
The current stock price -- shares closed Wednesday at $24.48 -- overestimates Citigroup's ability to turn its franchise value into money for shareholders, Mayo said.
He set a $21 price target, implying he expects the stock to drop about 14 percent.
Shares rose 22 cents to $24.70 in premarket trading.
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