My assumption is that the earnings right now are still depressed... ROE has been around 6% or so the past few quarters, but that is largely because they are still accounting for and working through troubled loans on their books. If C can get to 12% ROE, which is not that unreasonable, their earnings per share would be in the $.75 to $.80 per share range. that assumes no growth as well. Using a 10x multiple that gets you 7.50 as a share price. In my mind those are pretty conservative numbers. Its just a question of how long it takes to get the losses off the book.
Being less conservative, looking at 2001, C had a book value per share of around $15 and traded at low of around 33 (more like around 40 for most of the year). Today book value is $5. Using a very simplistic ratio, of 2x of book value, that means C would be in the $10 or $11 range. (Could easily be more like $14 or $15). I know that is really simplisticbut i think if you assume no more recessions for the next few years, then i think that is a good picture for C long term in a realitively stable environment.
Of course all of this doesn't mean earnings will be back up anytime before 2013. I guess that is the gamble with the options. the reason i'm looking is the payoff seems pretty good. now just trying to get an rough estimate of what the odds are that earnings go up by 2013. if anyone has any ideas on that, i'd be interested to hear
