Citigroup’s Last Downgrade Before Earnings (C)

October 12, 2007 by Douglas A. McIntyre

Citigroup (NYSE:C) is feeling the wrath of yet another SELL rating, this time the downgrade came from Deutsche Bank.  Interestingly enough, the note directly challenges management saying changes are needed in the chairman position and dissatisfaction with management.  The shakeup putting Vikram Pandit over trading, investment banking and alternative investments may appear to be desperation or a last ditch effort.

Shares are down 1.5% at $47.58, at the lower-end of the $44.66 to $57.00 range over the last 52-weeks.  But there is another thought to consider.  This is the last business day ahead of earnings.  Citigroup ramped up its earnings date.  You could argue that this will allow it to be the first of the big banks to report so that the bank has no comparables at all from peers.  Citigroup already threw out all but the kitchen sink with its previously lowered guidance of a 60% profit plunge.  It’s already going to be ugly, but now the question is for how much longer. 

Last week it was cut to Sell at Punk Ziegel, and Lehman maintained an overweight rating but cut its target to $59 from $60 at the time.   UBS earlier this week maintained its own Neutral rating on the banking giant.  24/7 Wall St. has been quite vocal about Chuck Prince needing to go, and he made the hall of shame last year when we discussed Chuck Prince needing to be fired then.  There is even a CNBC interview I gave with more gruesome commentary on this topic.  But today we’ve also got Chuck Prince’s defense as to why the board can’t turn on him too much.  No one else has done much better lately. 

Citigroup shares have been dead money since 2000.  Dear Chuck Prince, "It’s time to go.  You served your purpose in cleaning up operations.  But now a racehorse is needed.  And why on earth are you paying Bob Rubin so much?"

Jon C. Ogg
October 12, 2007

Jon Ogg produces the 24/7 Wall St. Special Situation Investing Newsletter; he does not own securities in the companies he covers.