Citigroup (C) Can't Be Fixed: A $10 Stock?

It may be that Citigroup (C) will never be fixed. According to Oppenheimer & Co analyst Meredith Whitney the bank "will be forced to announce the sale of major businesses toward the end of this year or in early 2009.," according to Bloomberg.

The news service reports the analyst said “I think it’s an impossible feat,” Whitney said. “They don’t have the revenue power, they don’t have the earnings power in so many of their businesses. In her opinion, Citi may not have any meaningful earnings for five years.

Most analysts see some recovery for Citi next year. The consensus of brokers following the bank is that it will have $2.85 EPS in 2009. That gives the bank a forward P/E of just over eight for a stock trading at $24.

If Citi cannot generate earnings for an extended period, its problems go beyond its P/E. It will almost certainly have to raise huge sums, perhaps tens of millions of dollars, or sell off its most profitable units.

The pessimist’s case would put the Citi shares closer to $10 than to $20 as the end of the year approaches.

Douglas A. McIntyre