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Monday, September 25, 2006

The Beating Continue at Citi

The management at Citigroup needs to prove that the big financial services firm should not trade at such a deep discount to JPMorganChase and Bank of America. So, far, nothing has worked. Over the last 12 months, Citi’s stock is up 10%. But, over the same period, JPM is now up almost 40% and BAC has risen close to 25%. Over the last three months, the gap has widened. JPMorganChase and Bank of America trade at their 52-week highs. At $49.50, Citi is also close to its high for the period, but its rise from the it low is much less dramatic than for the other two companies.

The concern that the housing and economic slowdowns will hurt banks has done little to undermine the stocks of largest financial services firms. They simply don’t have enough mortgage exposure. But, there are concerns that a downturn in the stock market could hurt the lucrative private equity and M&A work that has benefited the like of Citi.

The issue with Citi’s market performance boils down to a simple problem. Wall St. does not think it is as well run as it rivals. The bank’s expenses have been growing faster that revenue, and its smaller competitor, Bank of America, earns more.

Until the perception that Citi has mediocre management is changed, it is likely to lag both BAC and JPM in share price.

Douglas A. McIntyre can be reached at He does not own securities in companies that he writes about.

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