Citigroup Trading Slightly Higher Despite Bearish Analyst Commentary

Morgan Stanley cut Citigroup’s (NYSE: C) 2015 and 2016 EPS estimates following the bank’s second quarter earnings report. 2015 earnings were cut by 2.4 percent, while 2016 EPS was dropped by just 0.5 percent.

The main reason for the cut is Citigroup’s expense ratio improving more slowly than expected. Analyst Betsy Graseck wrote, “Citicorp expense ratio of 59% was slightly higher than our estimate of 58%. Citi is close to achieving its targets for lower headcount, branch optimization and reduction in product offerings, but core operating expenses have been sticky at $10.2bn vs. $10.4bn in 2Q13.”

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Graseck continues to note that she expects the expense ratio to drop from 58 percent in 2014 to 54 percent in 2016.

Morgan Stanley currently has a $58 price target on Citigroup, which is based on 10.9 times 2015 PE and 0.9 times 2015 tangible book value.