Citigroup: Banking on a Turn

The giant bank and securities firm has been unfailingly bullish in its view of the stock market. Its own shares have languished for so long that you have to wonder if the market is paying attention.

How's this for a paradox? Citigroup's economists and financial analysts are positive about corporate profits, the stock market, and the American and world economies. "The onus is on the worriers" to defend their downbeat case, economist Steven Wieting wrote in late March. Tobias Levkovich, Citi's equity-market strategist, thinks Standard & Poor's 500-stock index, which closed at 1417 on March 28, will reach a record 1600 by the end of 2007. That's 11% higher than it is today.

By contrast, Merrill Lynch seems on the verge of declaring a recession. Yet Merrill's stock has pounded Citi's shares (symbol C) over the past five years. So have the shares of Goldman Sachs, Bank of America and Wells Fargo. If it could, Citi would probably publish a buy rating on its own stock -- it likes most of the big banks and financial services sectors -- but its shareholders have a right to be frustrated. A never-ending series of strategic changes and acquisitions and divestitures hasn't paid off. Citi's stock closed at $50.97 on March 28, down just 0.2% on a day when the overall market fell sharply. The stock is well above its 2002 low of $24, but still below its record high of $59, set in 2000. And it's up only 6% since July 2004.

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Jeffrey R. Kosnett
Senior Editor, Kiplinger's Personal Finance
Kosnett is the editor of Kiplinger's Investing for Income and writes the "Cash in Hand" column for Kiplinger's Personal Finance. He is an income-investing expert who covers bonds, real estate investment trusts, oil and gas income deals, dividend stocks and anything else that pays interest and dividends. He joined Kiplinger in 1981 after six years in newspapers, including the Baltimore Sun. He is a 1976 journalism graduate from the Medill School at Northwestern University and completed an executive program at the Carnegie-Mellon University business school in 1978.