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Over the last few years, banks have been put under a lot of strain as regulatory bodies around the world have imposed a number of rules and regulations designed to get their houses in order. Citigroup has over 200 million customers in over 160 countries. The sheer size of the company has ensured the task it has to face is far more daunting than some of its smaller competitors.
In the last two weeks Citigroup has agreed to reimburse a group of 18 clients a total of $1.12 billion for the mis-selling of mortgage-backed securities prior to the financial crisis. Because of issues like this, Citigroup was the only major US bank to miss its fourth-quarter target. There have also been questions about how successful the bank has been with its cost-cutting exercises, certainly in comparison to competitors.
The consensus amongst institutional analysts is that Q4 was the wakeup call it needed to get back on track, and over 60% have the US bank as a 'buy' with the average 12-month price target of $62. Considering the shares are currently trading at $46.80, that is a very generous premium.
As long as the shares can keep closing above the $46 level we would envisage a climb back up to the $50 region, where they would have to face the dual hurdle of clearing the 100- and 200-day moving averages.