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Yesterday, we learned that Citigroup was one of four banks that failed the Federal Reserve’s stress tests. And the Wall Street analysts are now sounding off.
JP Morgan’s Vivek Juneja downgraded Citigroup to neutral from overweight and cut its target price this morning. Here’s what he had to say:
[W]e are downgrading shares of Citigroup to Neutral from Overweight following the Fed’s refusal to approve Citi’s capital return plan. Increased capital return in 2012 has been one of the key tenets to our Overweight rating on Citigroup. In addition, we think this denial also hurts management credibility, which had been tarnished following 4Q earnings when expenses were above expectations. Valuation remains attractive, but we see limited upside in the near term until Citi can begin to return capital. We are trimming our estimates to reflect lack of share buybacks in 2012 and little lower repurchases in 2013–2012 to $4.25 from $4.28 and 2013 to $4.75 from $4.90. We are reducing our YE’12 price target to $42.50 from $46.50 to reflect a lower price to tangible book multiple due to the delay in capital return.