Valens Equity Weekly Insights and Inflections for March 29, 2022
- Citigroup (C) looks to finally be rounding the corner of its transformational reconstruction. Uniform Accounting shows both the company’s significant operational improvements, and that the market isn’t pricing them in sustainably. That makes Citi a compelling buy.
- Citi has historically been a worst-in-class performer in terms of Uniform ROE, around 5% in the early 2010s, however, these operational improvements have already lifted ROE towards peer levels, approaching double-digit levels, and there is still more progress management is making around both back-office operations.
- Citi management is aligned to focus on improving profitability, making smart capital allocation decisions, and growing the business, exactly how investors should want them aligned. Also, after prior CEO Corbat’s groundwork on cleaning up Citi’s portfolio of businesses, new CEO Fraser is set up well, and has the experience to, finish cleaning up Citi’s operations.
- Management’s confidence in the Q4 earnings call about selling non-core assets, improving macro conditions, and risk controls highlight that management is executing to perfection.