Performance of major banks in first-quarter 2019 was quite impressive. Loan growth, rising fee income, controlled expenses and rise in interest rates supporting margins boosted investors’ confidence in banking stocks. Therefore, some of these stocks can be profitable additions to your portfolio, supported by robust fundamentals and encouraging long-term prospects.
Thus, this is the right time to add a few banking stocks to your portfolio. Today, we bring one such stock — Citigroup (C - Free Report) — that continues to depict robust fundamentals and improving prospects. This bank appears to be a solid bet right now due to its sound organic growth strategies. Also, the company witnessed prudent expense management, along with increasing loan and deposit balances, over the last few years.
Further, this Zacks Rank #2 (Buy) stock has appreciated more than 3% over the past year as against the 0.6% decline registered by the industry.
In addition, the Zacks Consensus Estimate for its current-year earnings has been revised 2.4% upward, over the past 30 days.
Why Citigroup is a Must Buy
Revenue Strength: With improvement in the interest-rate scenario, following the rate hikes and steady loan growth, strain on net interest revenues continues to ease. In 2018 and first-quarter 2019, uptrend in NIR was witnessed, after a declining trend that prevailed for years. Notably, management continues to expect the net interest revenue percentage to improve or remain stable in 2019. Therefore, such a positive trend will aid overall revenue growth.
Moreover, the company’s projected sales growth of 1.7% for 2019 ensures continuation of the upward revenue trend.
Earnings Per Share Growth: Over the past three to five years, Citigroup witnessed earnings per share (EPS) growth of 5.1%. Notably, the company also delivered an average positive earnings surprise of 4.74%, over the trailing four quarters.
Furthermore, earnings momentum is likely to continue in the near term as indicated by the company’s projected EPS growth rate of 14.3% for the current year.
Prudent Expense Management: The New York-based lender has been successful in reducing expenses at a CAGR of 6.6%, over the last five years (ended 2018). Expenses dipped as the impact of higher volume-related expenses, and ongoing investments were more than offset by efficiency savings and the wind-down of legacy assets. Notably, the declining trend continued into first-quarter 2019 as well. Such cost-management initiatives will support the bank’s bottom-line growth.
Impressive Capital Deployment: The company’s 2018 capital plan received the Fed’s approval, following which the company raised its quarterly dividend to 45 cents per share, up 40.6% from the current payout of July 2018. Moreover, it has a share-repurchase program of up to $22 billion in place. These activities reflect its capital strength and commitment toward rewarding shareholders.
Stock seems Undervalued: Citigroup seems undervalued when compared with the broader industry. Its current price-to-earnings (F1) and price-book ratios are lower than the respective industry averages.
Other Stocks to Consider
First Business Financial Services, Inc. (FBIZ - Free Report) has been witnessing upward estimate revisions, for the past 30 days. Moreover, this Zacks #1 (Strong Buy) Ranked stock has rallied more than 14%, in the past six months. You can see the complete list of today’s Zacks #1 Rank stocks here.
JPMorgan (JPM - Free Report) has been witnessing upward estimate revisions, for the past 30 days. Also, the company’s shares have gained nearly 4.2% in six months’ time. At present, it carries a Zacks Rank of 2.
1st Source Corporation (SRCE - Free Report) has been witnessing upward estimate revisions for the past 30 days. Additionally, the stock has jumped around 1.7% over the past six months. It currently carries a Zacks Rank #2.
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