Materials

Report by Ben Jones Investments

Ben Jones reiterates his bullish view with the stock up ~200% since initiation in July 23. AAZ is set to enjoy a dramatic increase in net income as well as FCF which is expected to swing from -$2m (2024) to c.$126m (2026) - a 45% FCF yield on today’s m/cap. He expects AAZ to develop 3 new mines (without raising equity) over the next 5 years which will boost copper production from 2.1kt in 2023 to around 40kt per year from 2028. Ben increases his base case price target from £3.70 to £5.59 (150% upside), assuming long-term copper prices at $4.50/lb, but with optionality to £8.00+ if long-run copper averages $5.50/lb, as forecast by Citi and BAML. Since publication of Ben’s report, AAZ has disclosed it is in preliminary takeover talks - unsurprising given his view that the market continues to undervalue the company’s asset base and growth profile.

Report by Aitken Advisors

This is the question James Aitken was asked repeatedly at Citi’s Australia Conference. Treasuries continue to defy the sticky inflation, debasement, fiscal crisis, Trump risk premium narrative. Swaption skews, however, continue to suggest treasuries will remain bid. Some kind of ‘AI productivity’ angle also helps treasuries or at least ensures inflation expectations remain well anchored. James suggests to shave it down with Occam’s Razor. The US budget deficit/GDP is going to end 2025 with a low 5% handle. Pending financial regulatory relief (leverage ratio) means the big US banks have the capacity to add treasury duration. And James thinks several of them will, in scale. An end to QT means the Fed will reinvest to keep treasury holdings constant, and to maintain the WAM of SOMA holdings which is currently ~8.3 years. That, too, probably ensures the ~10-year part of the curve remains well behaved. All in, James bets the ten-year note will remain supported.

Financials

Report by Portales Partners

Charles Peabody believes we are in the mature phase of the capital markets cycle, with revenues likely topping out in 2026, while stocks are expected to turn lower well before then. He recommends selling Morgan Stanley and Goldman Sachs on near-term strength. Credit and liquidity stresses are emerging following the automotive credit, Tricolor and First Brands developments, while syndicated loan offerings are being pulled. He sees echoes of Bear Stearns at JEF, noting that MS and BlackRock have ended relations with Bonita Point, the JEF subsidiary housing First Brands receivables, just as this rapidly growing broker reached top-tier status. Sell Capital Markets, Buy NII - he favours Citi, M&T, Citizens Financial and UBS.

Financials

Report by Portales Partners

After earnings beats from JPMorgan, Wells Fargo, Goldman Sachs, Bank of America, PNC as well as Citi why were all the other banks up significantly and Citi was down 5%? Charles Peabody discusses asset caps (Citi is already shrinking itself by shedding its global consumer bank, so an asset cap makes no sense whatsoever) and a probable delay in the Banamex IPO. He argues Citi is one of the best stories in large cap financials and is the only company able to repurchase large amounts of its common stock at a substantial discount to TBV. Expectations are low, the regulatory pressure is high and management is doing all the right things.

Financials

Report by Portales Partners

Charles Peabody provides a comprehensive analysis of recent 4Q23 results and his revised outlook for 2024-25. No bank sharply exceeded expectations, but NII was generally better than anticipated, while credit trends were generally worse. The revenue outlook for 2024 is mixed with high hopes for capital markets revenues and expectations that NII will bottom by mid-year setting up for a robust 2025. Charles favours 1) Citi - epic valuation discount to TBV but is mistakenly ignored by many as a value trap. 2) Wells Fargo - saddled by excessive CRE exposure, but investors forget this company has survived every CRE cycle of our lifetimes. 3) JPMorgan - "over owned" but still benefiting from the First Republic deal.

Financials

Report by Portales Partners

While many are trumpeting the fact that GS is returning to its roots, investors should remember what those roots were and why investors and (GS itself) wanted to transform this organisation into something different. Charles Peabody loves a turnaround story and has been alongside Bank of America in the past, Wells Fargo, and more recently Citigroup, emphasising that it generally takes 5 years to transform a company. GS is no different. He would exit the shares and favours Citi as a turnaround, WFC as a work in progress about to exit a regulatory yoke, BAC as a play on rates, and JPMorgan as a defensive fortress.

Financials

Report by Portales Partners

Charles Peabody upgrades the stock to Buy - he believes the marketplace will begin to appreciate the integrity of Citi’s balance sheet as management executes on its goals. Charles is projecting a $75 price target based on an 8.5% RoTCE and a projected TBV of $88 by the end of 2023. He thinks that following the successful sale of most of its international consumer banking operations, including Banamex, Citi could resume stock buybacks in the $3-4bn range in 2H23. The stock trades at less than an 8 P/E, 62% of last year’s TBV and offers a 4% dividend.

Financials

Report by Hemindra Hazari

Citi’s well-off retail clients may not travel meekly to Axis Bank - while its acquisition of Citibank India’s consumer finance division has been applauded by the stock market, shareholders should consider that Citi’s retail customers are used to superior service standards from a robust technology platform and a dedicated and well-paid staff. Unfortunately, Axis Bank’s technology systems are less reliable, and a toxic work culture has impacted staff morale and customer service. Meanwhile, competitors have already chalked out strategies to poach Citi’s premium customers.

Financials

Report by Portales Partners

Downgrades to Sell following 4Q21 results - Charles Peabody cuts his 2022 EPS estimate from $7.50 to $6.65, which implies an RoTCE of ~8.5%. Capital returns should prove constrained and uneven. The fourth quarter fundamental metrics were weak, the monetisation of Banamex will take time to accomplish and the much-anticipated March Investor Day is likely to show that any turnaround is going to be a slow, grind-it-out, multi-year process. In short, there’s no silver bullet that will get Citi back to a 12% RoTCE anytime soon, and those returns are still likely to prove to be subpar relative to its peer group. TP $55 by summer 2022.

Financials

Report by Galliano's Financials Research

Citi to sell its Mexican retail and SME banking operations - “new Banamex” is worth USD7-10bn according to Victor Galliano. Grupo Salinas owned Banco Azteca seems a strong candidate to make a bid, especially since Ricardo Salinas is close to the Lopez Obrador government. Carlos Slim’s Inbursa could also be a good fit. Both potential bidders are likely to attracted by the deposit rich nature of the Banamex franchise, as well as the capillarity of the branch network, even in these increasingly digital times.

An inflection point in the Citi Surprise Index confirms the recent momentum in equity indices and collapse in volatility structures. John Karle has crunched the data to find that, after such events, six month returns average +8.48% for the S&P500 and +11.36% for the Russell 2000. It is yet another event that bolsters the case for accelerating economic growth expectations, and it won’t be idiosyncratic to the US!