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Mayo to Citi: Change the Bulb!

Vikram Pandit
AP
Vikram Pandit

Vikram, change the bulb!

That’s basically the message to Citi from Mike Mayo, Credit Agricole’s financial sector analyst in his first note since meeting with management in October, 2010. Mike notes Citi’s “belated” but necessary strategy to “…spend US $3 to $4 billion extra for consumer banking over three years." His latest concern is not so much with strategy but with Citi's execution of its strategy. He points out that some of Citi's older, legacy branches are in need of such basic fixes as a new bulb.

While Mike is not a client of Citi , he has been watching the process, including, a trip to one new branch at Union Square with his daughter.

Source: CLSA

While he seemed impressed with the décor, he was less impressed with its functionality—apparently the “live video chat” function was not functioning.

Source: CLSA

Via email, Mike Mayo summed up his concerns: ”…will this $3 million or so cost of a new branch payoff? Will they get their systems connected?” In his note he says the Union Square branch is a prototype for a larger roll out and that “…Citi is pursuing this growth at a time of traditional banking weakness that has other banks closing branches…”.

No change on investment outlook—Mayo maintains a rating of “underperform” with a 12-month price target of $4 first set on October 12, 2010. In addition, he notes BlackRock Global Investors is a major shareholder with 2.9 percent of outstanding shares.

A spokesperson for Citigroup declined to comment.

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