GO
Loading...

Bulge Bracket Banks 'Just Aren't Investable': Pro

Citigroup Headquarters in Long Island City, New York.
Stephen Hilger | Bloomberg | Getty Images
Citigroup Headquarters in Long Island City, New York.

Despite Citigroup's announcement on Wednesday that it plans to cut 11,000 jobs as part of a broad restructuring effort, one analyst told CNBC that he does not like bulge bracket banks at all due to macro risks.

"I don't like the bulge bracket banks at all, and it's basically because I think the market is really highly underestimating these macro risks," said David Trone, head of U.S. banks and brokers research at JMP Securities.

Failed political leadership in the U.S. is causing corporate CEOs to be wary of transactions, and this hesitancy is important because Citigroup touches corporate chiefs all across the spectrum, Trone said. But if this changes, Citigroup could profit, he told "Squawk on the Street."

"Certainly if we resolve our cliff and if the E.U. can definitively, sustainably, resolve its sovereign debt issues, you know, I think the sun will come out," he said. "And I think capital markets activity, lending activity, transactions — all the things that Citi does — I think will certainly have a good amount of pent-up demand, and we could have a nice top-line."

The investment community has been looking for Citigroup job cuts for some time, Trone said.

"I'm not surprised," he said. "You know, Citigroup was clearly a company that had a lot of bureaucracy and they were in a lot of different parts of the world, a lot of different products, and there was certainly some ability to trim fat."

Although Trone maintains an "underperform" rating and a $26 price target on Citigroup shares, he does favor Citi over some other bank names, including Bank of America and JPMorgan Chase.

Under the new regulatory landscape of Dodd-Frank, Trone forecast that returns would not really get beyond 10 percent. He described consumer finance as "almost not-for-profit these days."

"I think you'll see the big banks get out of consumer finance and I think it's going to be a very tough business under Dodd-Frank," he said.

Additional News: JPMorgan Updates Profit Outlook

Additional Views: Five Bank Takeout Targets

Symbol
Price
 
Change
%Change
C
---
BAC
---
JPM
---

Featured