C:NYSE

The views expressed below are those of Anchor Capital Advisors, LLC (“Anchor”) as of the date written and are subject to change at any time. They are based on our proprietary research of the stated company and the following is a summary of the primary factors that support our beliefs and rationale for investing in the company. Please see additional disclosures at the end of this publication.

C:NYSE

MSCI ESG Rating: A

Citigroup Inc. is a diversified financial services holding company. The Company provides a range of financial products and services, including consumer banking and credit, corporate and investment banking, securities brokerage, trade and securities services and wealth management.[1]

Investment Thesis

Citi was severely damaged in the 2008-2009 financial crisis. Since then, the company has been rebuilding with plenty of liquidity and its balance sheet has been significantly derisked. The company has shed a large amount of legacy assets since 2009. But with new management in place, the company is well positioned to rerate.

Citi stock has underperformed its peers as the company’s profitability is still being held back by lower margin Global consumer bank and issues related to its risk management. The stock has significantly de-rated relative to its peer group. But with new management in place, we expect Citi to shed some of its lower margin, but highly valuable consumer banking businesses and reinforce its risk management.

With more than half of revenue coming outside of North America, Citi is one of the best positioned for emerging markets growth, amongst the large banks.[2]

Confirmation through Research

Citigroup is one of the largest global financial institutions with three main segments. The Institutional Client group segment provides corporate, institutions and high net worth clients. Citi is the globally leader in corporate fixed income and corporate cash management.[3] With global operations, its cash and treasury management business is an unmatchable network and its crown jewel.

Global Consumer banking provides traditional banking services to retail customers, including credit cards. The company is the largest global credit card issuer, number two player in the United States, and has a highly profitable retail network in select cities.[4] However, the company also retail networks in places including Mexico, Hong Kong, Singapore, Australia and Taiwan, which are great regional players, but whose profitability, we believe, lags best-in-class peers.[5]

Variant Perception

In our opinion, Citigroup has materially underperformed its peers due to underlying credit risk as well as concerns about its ability to streamline its global retail operations. However, the new CEO, Jane Fraser, is viewed as an excellent operator and we believe she will rationalize some of the underperforming assets. Citi has a strong balance sheet that was recently stress tested by the Federal Reserve.