Online Extra: Will Citi Still Shine?

Fund manager Tom Goggins thinks it will, despite the recent scandals

Most money managers are now steering clear of the stocks of struggling, scandal-tainted financial giants. But there is one glaring exception: Citigroup (C ). The company has managed to rack up earnings consistently despite a harsh business environment and a slew of investigations into how it manages its conflicts of interest. Here Tom Goggins, manager of the John Hancock Financial Industries Fund, tells BusinessWeek Investment Banking Editor Emily Thornton why Citigroup is one of his major holdings:

Q: Given how much financial-services companies have suffered from a bad rap this year, are there any quality companies trading at bargain prices?


Citigroup looks pretty darn cheap. It will probably earn $3 per share this year. At $37 [per share], it's selling at 12 times this year's numbers. That's cheap considering the Standard and Poor's Index is trading at 17 times. And they've proven to be able to grow revenues through this recession over the last couple of years.

Q: What about the potential cost of pending investigations into whether the company misled investors with overly rosy stock recommendations?


Whatever New York Attorney General Eliot Spitzer wants to take out of [the group] won't be much of an issue. They have tons of capital. If you compare Citigroup to other global financial service giants, their capital is well in excess of any player in Europe. Moreover, eventually we'll have initial public offerings and mergers and acquisitions again. American investment banks are poised to do well in that environment.

Q: Do you think that ironically recent scandals related to Citigroup's former telecom analyst Jack Grubman have helped the group more than hurt it?


I think Sandy Weill has done a pretty damn good job of handling this whole thing. I don't know what anyone could second-guess him on besides perhaps hiring Grubman. Remember when Johnson & Johnson took care of its Tylenol problem? I think the way Sandy has handled this problem is in the same category.

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