Citigroup: Morgan Stanley Says ‘Buy,’ Here’s Why

Citigroup: Morgan Stanley Says ‘Buy,’ Here’s Why

  • Posted Friday, May 06, 2011 -
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Associated Press

Financial analyst Betsy Graseck of Morgan Stanley is hitting the buy button on Citigroup Friday, the second big buysider shop to get bullish on the shares this week. She offers three reasons why she's hitting the buy button now.

1. Citi is shrinking non-core assets faster than we expected, in part via asset sales. We now estimate a 6.75-year wind-down, below our prior 9.25-year estimate. As a result, the [net present value] of non-core losses falls 69%, to $1.8 billion from $5.8 billion. We model Citi Holdings at 5% of assets in 2014 vs. 17% in [first-quarter 2011] (which added two cents to 2013 EPS estimates).

2. Non-U.S. markets are showing higher growth and returns. We are raising our international earnings CAGR for Citis ongoing core business to 8% from 6% through 2013 (which added three cents to the 2013 EPS estimates).

3. Faster Citi Holdings wind-down with lower losses frees up [an estimated $19 billion] through 2014. We expect it to go toward buybacks starting in 2012, and forecast 49% of current market cap returned to shareholders through 2014, including 9% via dividends ([adding three cents to 2013 EPS estimate]).

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