Citigroup shares received two downgrades on Wall Street after a disappointing forecast on returns for an important banking benchmark. The company on Wednesday announced it set a medium-term target for return on tangible common equity, a key industry metric, for around 11% to 12%. "The uninspiring medium-term ROTCE target of 11-12% is simply not high enough to merit an Overweight recommendation in the near term," Atlantic Equities' John Heagerty said in a note Thursday. Atlantic Equities downgraded the bank stock to a neutral rating from overweight. The firm also cut its price target on the stock to $70 from $85. The new projection is still 7.5% higher than Citi's close Wednesday. KBW also cut its outlook on the stock and believes there is a long road ahead for improved returns. "We believe the near-term risk/reward is not compelling given capital and expense uncertainty," KBW's David Konrad said in a note Wednesday. "The historical under-investment coupled with the need to not only invest in technology and controls but also heavy investments in Citi's growth businesses are expected to prolong subpar returns." KBW downgraded Citi to market perform from outperform and slashed its price target to $64 from $81, which implies 7.5% upside from Wednesday's close. Both firms see a compelling long-term story in Citi as the bank undergoes a transformation . However, the analysts anticipate growing pains. "We support the transformation process that Citi is undertaking, with the bank looking to strengthen its risk management framework and improve automation throughout the business," Heagerty said. "However, this comes at a cost." Citi shares are down 1.4% in 2022 versus the S & P 500's roughly 8% loss. The stock was marginally lower in the premarket Thursday. —CNBC's Michael Bloom contributed reporting.
Citigroup said it had identified the cause of the flash crash and corrected the error "within minutes."
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Citigroup shares received two downgrades on Wall Street after a disappointing forecast on returns for an important banking benchmark.