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(Bloomberg) – Citigroup briefly lost its status as Wall Street’s least-loved big bank stock, pushing Morgan Stanley to the bottom. Then another analyst spoke up.
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Jane Fraser’s Citigroup has had the lowest consensus rating among six large U.S. banks since May 2022, according to data compiled by Bloomberg. That all changed this week when an HSBC Holdings analyst replaced his recommendation to upgrade Citigroup and downgrade Morgan Stanley.
“Citigroup is an attractive vehicle to gain banking exposure,” HSBC’s Saul Martinez said in a note, adding that the company is “our preferred choice among large-cap banks.”
And late Tuesday, BMO analyst James Fotheringham downgraded Citigroup on market performance. This pushed the stock slightly below Morgan Stanley’s consensus rating.
Citigroup received upgrades from Wolf Research and others as bank stock analysts reset their ratings for 2024. Wells Fargo’s Mike Mayo named the company a top candidate, saying the stock could double in the next few years.
Read more: Distressed Fraser turns to downsizing to cure City’s painful recession
The balance of analysts recommending a Citigroup buy tilted even more positively early in the week ahead of the earnings release, while BMO said banks and specialty finance stocks were “vulnerable” after a late-2023 rally. The company downgraded the stock with a wide range of criticisms. Analysts’ overall price target still indicates they expect the stock to rise about 8% over the next 12 months.
Meanwhile, the majority of analysts recommend investors hold Morgan Stanley but not add to the stock. No analysts have rated the stock a sell. The average price target is for an increase of more than 3% next year. Ted Pick was appointed CEO of the company earlier this month, replacing James Gorman.
For HSBC’s Martinez, Goldman Sachs Group Inc. is a better fit than Morgan Stanley for the expected recovery in its capital markets business.
The four largest U.S. banks, including Citigroup, are scheduled to release their earnings and begin Corporate America reporting on Friday.
(Update to add BMO downgrade.)
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