Portfolio Manager Jason Hans of BMO Asset Management is overweight Citigroup Inc (NYSE:C), even as he is currently neutral-weighing financials as a whole. Hans says his firm began buying the stock this year after seeing positive changes to the company’s fundamentals.
We haven’t owned Citigroup since before the financial crisis. It’s a name that we have not liked for a very long time. But this year, we started to see some positive changes to a lot of the fundamentals at Citigroup, starting with their most recent stress test. They came through that process with a very good score from the regulators, and in fact, they came through with the best score of any of the big banks.
What that means to investors is that Citigroup will potentially have the opportunity to be more flexible with its capital in terms of share buybacks and dividend increases.
They are in a very strong capital position. At the same time, Citi is one of the only, if not the only, large universal money center banks that is trading below its tangible book value, so it is one of the cheapest stocks in our universe, and we are starting to see that stabilization and even improvement in the fundamental characteristics of the company. That is when we like to start buying, when we see a very cheap stock start to improve in its fundamental outlook.