Being known as a “popular destination for money launderers” isn’t exactly the kind of thing you want to put in your promotional literature. That’s particularly true if you’re a bank like Citigroup (NYSE:C), who recently got hit with just such a designation from US banking officials. The news didn’t hit investors all that hard, however, and they sent shares up fractionally in Monday afternoon’s trading.
A report attributed to “senior US law enforcement officials” delivered the hammer blow to the bank, noting that drug traffickers believed that Citigroup was “more favorable” to their operations, thanks largely to lighter fraud controls. The report was part of a larger issue, as a recently-unsealed indictment against two members of the Sinoloa cartel who deposited “tens of thousands of dollars at Citi ATMs.”
The reports describe what could almost be called structuring, in which—on three different occasions in January 2021 alone—the duo fed around $36,000 worth of cash into said machines, pausing only minutes between transactions. The spaced-out transactions allowed the depositors to stay below a $10,000 threshold which automatically requires the transaction be reported to US Treasury Department officials.
A Rebuild In Progress
Perhaps with this concept in mind, Citigroup has been engaged in active restructuring. These efforts will likely take some time to be fully realized, but they’re already attracting attention. The Diamond Hill Capital Long-Short Fund recently called out Citigroup’s progress in its investor letter for 2024’s first quarter.
The letter noted that Citigroup “…continues remediating regulatory issues and building capital in anticipation of increased requirements.” Given what we’ve just heard about the Sinoloa cartel, well, that makes a particular kind of sense. And, again, should indeed be rewarding down the line.
Is Citigroup a Buy or Sell?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on C stock based on 10 Buys and eight Holds assigned in the past three months, as indicated by the graphic below. After a 41.39% rally in its share price over the past year, the average C price target of $69.29 per share implies 9.15% upside potential.
