Citigroup Inc. can’t grow without making loans, a business the bank doesn’t seem to excel at, according to Odeon Capital analyst Dick Bove.

“At its core Citigroup is a bank that takes in deposits and makes loans,” Bove wrote in a note cutting shares to hold from buy. “The problem is that it has not been doing a great job in facilitating this model.”

The downgrade comes three days after Citigroup reported second-quarter results that included setting aside $7.9 billion for souring loans, even as revenue from fixed-income trading surged 68%, keeping the bank solidly profitable.

Bove recommended Citigroup (C) take a “more aggressive lending policy,” and shrink its positions beyond the U.S. But he’s staying on the sidelines, as the “current environment is not conducive for growing the loan portfolio and the bank has no intention of leaving countries like Mexico.”

Citigroup fell as much as 1.5% in Friday morning trading. Shares have tumbled 37% so far this year while the KBW Bank Index has shed 35% and the S&P 500 has dropped just 0.6%.