Morgan Stanley More Positive On Citigroup

According to Morgan Stanley, Citigroup C Price target is up 25c and forward EPS up on faster reserve bleed driven by expectations for faster NPL shrinkage in Holdings vs prior est. Morgan Stanley said that total Citigroup NPLs are down 50% y/y in 1Q11, and down 24% q/q. “Expect decline to slow to ~10%/q. Reserve bleed est up by $4.6b to $8.6b in 2011 as we model reserves to an NPL reserve coverage of ~250% in 2011 (230% in Citi Holdings and 300% in Citicorp). We lowered our 2011 EPS est by 1c on higher share count. Further NIM pressure and continued weakness in brokerage and asset management segment was fully offset by expectations for faster reserve bleed in Cit Holdings and Citicorp. 2012 EPS up 3c on faster reserve bleed in Citi Holdings. PT up $0.25 to $5.25 on lower Holdings losses. We see 15% implied upside. Our target price implies 1.0x 2011 TBV and 10x 2012 EPS.” Citigroup closed yesterday at $4.56.