Citigroup (C) will have a new CEO in February next year, when Jane Fraser will take over from Mike Corbat. This is a good time to take a look at the bank. The thesis of this article is that the stock is a clear buy. If Ms. Fraser can inject growth into Citigroup, a double is on the cards. If.

Valuation is cheap

Let's start with valuation. Investors should value banks off earnings, not book value. One of the noteworthy sleights of hand of Wall Street sell side research occurs when banks' analysts are building valuation models off Price/Book Value that make the business of valuation appear more sophisticated than it is, by taking investors into ROE vs. cost of equity calculations. The giveaway is that ROE in these models is calculated by dividing earnings by equity. So they are, in fact, earnings driven. If earnings go up, the ROE goes up, and the model tells you to allow for a higher price/book value. Do yourself a favor: stick to P/E and forget book value. Next, check the capital ratios to see the strength of the balance sheet. Then go back to earnings as your main reference point.

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