Wells Fargo: Citi stock is the best in the banking sector and "this is just the beginning"

The growth potential of Citigroup shares, according to Wells Fargo analyst, remains significant, while this year they showed the best result among securities of large banks, having grown in price by one third. One of the reasons for the analyst's optimism is the effect of protracted transformation: Citi has already incurred major costs, but is just beginning to benefit from it.

«Все только началось, — заявил в интервью Barron’s банковский аналитик Wells Fargo Майк Майо. - Citi is benefiting from internal transformation and restructuring". 

Since the beginning of 2025, Citi shares have grown by almost 33% - the best result among 20 securities in the KBW Bank Index. According to Mayo's forecast, by the end of 2027 quotes could rise from the current $92.65 (at the close of trading on July 21) to $150. Its target price for the coming year is $115. The Wells Fargo analyst again named Citi as his top recommendation and urged portfolio managers to pay attention to this paper.

Among Mayo's arguments in favor of growth: the best profit forecast among the largest banks in the coming years, improved profitability, the effect of changes in the business structure and the increase in the share buyback program. The analyst said Citi has already incurred 75% of the restructuring costs, but has so far reaped only 25% of the expected benefits. "The costs are concentrated in the beginning, the benefits are in the future," he said. 

In recent years, Citi has simplified its structure to five business lines, closed many overseas retail branches and focused on global business. Its shares now trade at a multiple of about 9 on Mayo's 2026 earnings forecast for Citi - at a discount to other megabanks.

After Citi's strong second-quarter 2025 results set the tone for a new reporting season on Wall Street, analysts at Piper Sandler, UBS and Keefe, Bruyette & Woods noted the bank's improved outlook, substantial returns of capital to shareholders and a clearer focus on meeting profitability targets, notes Benzinga.

Scott Sifers of Piper Sandler maintained an "above market" rating (Overweight) and raised his target price from $84 to $104. Erika Najarian from UBS reiterated Neutral recommendation with $89 outlook on the stock. Christopher McGratty of Keefe, Bruyette & Woods maintained a Buy rating and raised the target to $105. 

According to FactSet, Wall Street considers it profitable to buy shares of any of the "Big Four" banks. Along with Citi, it includes JPMorgan Chase, Bank of America and Wells Fargo. The consensus rating of each of them is Overweight. The average target prices calculated by the service suggest BofA shares are expected to rise 11.5%, Wells Fargo - 8.6%, Citi - 8.5%, and JPMorgan Chase - 5.6% over the next 12 months.

Citigroup shares in mid-July hit their highest since 2008 after the bank announced an increase in share buybacks following strong results from regulatory stress tests. In early July, the bank announced plans to raise its dividend when it successfully passed the U.S. Federal Reserve's annual exam.

Even with this year's growth, Citi remains one of the worst earnings performers among its peers over the past 10 years. It is the only major bank whose shares are valued below book value ($94 per share). By comparison, JPMorgan Chase securities are trading at nearly triple that figure.

Citi's low valuation is explained by its weak profitability: the bank's earnings are only 8% of its tangible book value (the bank's equity less goodwill and other intangible assets) versus more than 20% for JPMorgan Chase, writes Barron's. For a megabank, 10% is considered the minimum acceptable level. Citi CEO Jane Fraser wants to reach it in 2026.

This article was AI-translated and verified by a human editor