Deutsche Bank upgraded Citigroup (NYSE: C) shares to buy from hold, noting the stock could get a boost from beaten-down levels given upcoming stress test results and a better business environment.
Citi shares are down 17% from their 52-week high hit in late January, underperforming Bank of America and J.P. Morgan Chase by 9% over this period, research analyst Matt O'Connor and his team said in a Tuesday report. The shares opened Wednesday up 54 cents to $67.32
Several events ahead could help Citi, the analysts said.
First, results from annual Federal Reserve stress tests that are due June 21 and 28 "should be positive" for Citi.
Second, macroeconomic negatives such as rising U.S. rates and a stronger U.S. dollar may abate.
Third, there have been some "positive" developments in Citi's U.S. credit card business around partnerships with Sears and Costco.
In addition, "expectations on cost efforts have been lowered enough that we don't see further disappointment."
Citi is scheduled to release second quarter results before the open on July 13.
The analysts also noted a "very positive" backdrop for Citi in fixed income trading, a category in which the company ranks second. The bank has also been "gaining momentum" in equities trading, the report said.
Citi also has "one of the biggest capital return stories among big banks," since management's plan to return at least $20 billion in capital a year in the near future represents 12% of the bank's market cap, the analysts said.
