Investors should buy stock in Citigroup now that CEO Vikram Pandit has stepped down, said Dick Bove, a banking analyst at Rochdale Securities.
Pandit stepped down unexpectedly Tuesday, catching Wall Street off guard.
The bank’s chief operating officer, John Havens, stepped down as well, sparking talk the board forced both executives out over strategy and operational issues.
Editor's Note: Economist Warns: 50% Unemployment, 100% Inflation Possible
The announcement shocked Wall Street since it came a day after the bank released earnings that topped Wall Street expectations.
Buy the stock anyway, said Bove, as Pandit’s departure brings about an end to differing viewpoints over the bank’s direction.
“I think it’s a screaming buy. I think people should really taking a look at this as a measure to increase the speed in which Citigroup’s turnaround will be accomplished,” Bove told CNBC.
“I think that we are likely to see a big shift in the bank to international. I think you are likely to see much more commercial banking type of activity. Cost cutting — I think there will be a drive to get a dividend next year and a stock buyback and I think the stock is selling at too big a discount to book value, therefore it is probably one of the best buys out there.”
Excluding items, Citigroup’s third-quarter earnings hit $1.06 per share, down from net earnings per share of $1.23 during the same quarter a year ago, and adjusted revenue fell to $19.4 billion from $20.83 billion a year earlier.
Both items beat expectations, as analysts had expected the company to report earnings excluding items of 96 cents a share on $18.71 billion in revenue, according to a consensus estimate from Thomson Reuters.
Pandit’s departure from the board is a clear indication that “this was a complete and unexpected break” between Pandit and Citigroup’s directors, said Chris Whalen, a bank analyst and senior managing director of Tangent Capital Partners in New York, according to The Associated Press.
“This shows how dysfunctional this organization is, to have this event unfold this way,” Whalen said.
“They should have told us [when they released their earnings], unless they didn’t know.”
Editor's Note: Economist Warns: 50% Unemployment, 100% Inflation Possible
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