Why is citigroup so cheap

Bank of America , which is more consumer-focused, trades at 2 times tangible book value. If Citi were to trade at similar ratios to its peers above, its share price could more than double. But it's imperative that the company steers clear of regulatory issues and tightens up operationally to stop preventable errors. However, Citigroup's participation signifies a vote of confidence from investors in the decision that fresh leadership was needed, and the follow-through up until now shows operations are progressing nicely.

Discounted offers are only available to new members. Stock Advisor will renew at the then current list price. Average returns of all recommendations since inception. Cost basis and return based on previous market day close. Investing Best Accounts. Stock Market Basics. Stock Market. Industries to Invest In. This is a BETA experience. You may opt-out by clicking here. More From Forbes. Nov 10, , pm EST. Nov 10, , am EST.

Edit Story. Jan 25, , am EST. Trefis Team Contributor. That's cheap compared to most of Citigroup's peers and the industry in general. However, after Citigroup reports earnings, I think there will be even more reason for investors to purchase the stock, because I expect TBV per share to grow. When TBV grows, a bank's stock price tends to follow, because if you believe a bank is worth a certain valuation, the stock price would have to increase as well to stay in line with that valuation.

I expect Citigroup will show some pretty solid TBV growth next quarter because the bank has been repurchasing shares, and when banks do this while trading below TBV, the math works out so they end up growing TBV per share.

We know Citigroup is repurchasing shares because management told us as much on past earnings calls. But at the time, banks were also subject to limits set by the Federal Reserve on how much capital they could return to shareholders.

Those restrictions were lifted at the end of the second quarter, leading me to believe that Citigroup likely repurchased more shares in Q3 than it did in either of the first two quarters of the year. The opportunity to repurchase shares for less than tangible book value is usually a gift to banks -- especially for a well-capitalized bank with good earnings power, like Citigroup. That's why most expect management to take advantage. So you should probably be selling the -- your desk chairs and your silverware and anything you can to buy back your stock, I would think.

Assuming Citigroup repurchases more than it did in the second quarter -- considering it traded below TBV for the entire quarter and there were no Fed restrictions in place -- I would expect TBV to potentially grow more than it did in the first two quarters.

TBV per share grew 2. Now, there is no guarantee that life will work like this, as it rarely does. Registration will be done automatically. Be one step ahead in managing your banking account with Citi Mobile App. Now, financial control is within your grasp anytime anywhere.

Skip the queues and traffic. Get information, pay bills and manage your card transactions online. Every month. No cap. No Late Fees. No Over Limit Fees.