Citi Is Worth the Sum of Its Parts for First Time in Seven Years

(Bloomberg) -- For the first time since September 2018, investors consider Citigroup Inc. to be worth at least the sum of its parts.

In a boost for Chief Executive Officer Jane Fraser as she pushes her turnaround plan, the bank’s market value relative to the value of its assets, known as price-to-book ratio, equalized Friday in a sign that the bank is making a comeback from its laggard status on Wall Street.

The ratio is a valuation metric that bank investors pay close attention to. Since regulators focus heavily on book value and banks’ business models can make their earnings volatile, the ratio provides a more stable reference than other metrics investors might care about more in other sectors, such as the price-to-earnings ratio.

“This is a significant milestone because it reflects a company transitioning from value destruction to value creation,” Wells Fargo & Co. analyst Mike Mayo said in an interview. A price-to-book ratio of 1 or higher “is the difference between a company that does not deserve to exist and a company that deserves to exist,” said Mayo, who reiterated Citigroup as his top pick for 2026.

Citigroup’s ratio has improved this year as the stock outperformed all of its Wall Street peers, gaining 55% compared to its closest rival, Goldman Sachs Group Inc.’s 49% jump. Bank of America Corp. has advanced just 23%, while the KBW Bank Index is up about 25%.

The bank has faced a raft of challenges since the financial crisis, including lingering data and back-office problems that have led to embarrassing “fat-finger” errors and regulatory penalties. It’s still subject to two 2020 consent orders from the Federal Reserve and the Office of the Comptroller of the Currency, and was fined more than $130 million last year for slow progress on data quality management and risk controls.

In a sign of confidence for Fraser, the New York-based company in October named her chair of the company’s board, making her the last of the big six US bank chiefs to hold both titles. Fraser is also the first Citigroup leader since before the 2008 financial crisis to be given the two roles.

Under Fraser, who became CEO in March 2021, the bank is pushing a plan that’s involved upgrading its back office, cutting headcount and exiting international retail operations.

Citigroup had been the only major bank to trade below its book value. Still, its price-to-book ratio is well below that of its peers. Morgan Stanley, JPMorgan Chase & Co. and Goldman Sachs all have a price-to-book ratio well above 2. 

--With assistance from Matt Turner.

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