Analyst Mike Mayo said that Citigroup, Inc (NYSE: C) is not spending enough on computer equipment, ATM machines, real estate and other items which make up its franchise.
In a research note to investors on Wednesday, Mayo said that a reduction in capital expenditures of as much as $4 billion since 2006 means that Citigroup, Inc (NYSE: C)’s assets are depreciating faster than investment to improve the bank’s operations. Mayo said that it may lead to an “infrastructure that may be outmoded compared to its competitors.”
Mayo asked, “How much is Citigroup running the company for the long term?” He noted that Bank of America Corp (NYSE: BAC) is spending as much as $2 billion per year on capital expenditures, almost twice that of Citigroup. He added that the difference “raises new questions as to whether Citi is putting enough resources back into the franchise.”
Mayo currently has an “underperform” rating on shares of Citigroup, Inc (NYSE: C) with a 12-month price target of $3.50.
Citigroup Inc. (Citigroup) is a global diversified financial services holding company. The Company provides consumers, corporations, governments and institutions with a range of financial products and services. As of December 31, 2009, Citigroup had approximately 200 million customer accounts and did business in more than 140 countries. Citigroup operates through two primary business segments: Citicorp, consisting of its Regional Consumer Banking (RCB) businesses and Institutional Clients Group (ICG), and Citi Holdings, consisting of its Brokerage and Asset Management (BAM), Local Consumer Lending (LCL), and Special Asset Pool (SAP). In April 2010, Barclays PLC acquired Italian credit card business of Citibank International Bank plc. In May 2010, the Company announced the creation of a new Collateral Management Services unit within its Securities and Fund Services business.
Shares of Citigroup, Inc (NYSE: C) traded up 0.97% during mid-day trading on Thursday.
