Most Experts Believe Citi is in for Great Things, but One Expert Disagrees

A recent poll consisting of 34 respected financial analysts (tracked by Bloomberg) showed that a vast majority believe Citigroup is on the cusp of major profits.

But one of the four dissenters is the well-respected Charles Peabody, lead researcher at Portales Partners, LLC – the very gentleman who foresaw and predicted the mortgage crisis as early as 2005. He reasons that if the dollar continues to improve against foreign currencies such as the yen and euro – which comprises about 50 percent of the company’s profits – that Citi could actually end up in the red to the tune of $5 to $7 billion.

Peabody believes that this trouble from without (think: global economic weakening) will be even more cause for concern than trouble from within (think: Citi’s competition in the United States.)

In the short run, it looks like he may be on to something, as Citigroup’s stock fell nearly four percent to $49.95 in New York training. This figure marks the worst performance for Citi since February.

As recently as last June, Peabody estimated that, due to the decline of the Mexican peso and the Brazilian real against the dollar, Citigroup’s currency losses could end up somewhere between $3 to $5 billion. Instead, the bank showed a loss of $1.6 billion.

These slides continue as the peso has declined six percent against the dollar since May, with the real tumbling slightly more. These numbers only serve to support Peabody’s prediction that the Dollar Index (which gauges the dollar against six other currencies) will rise more than five percentage points to 86.1 before year’s end – and could eventually get as high as 92%. These are lofty numbers when you consider that the Index hasn’t hit 90 percent since 2006

It’s important to note that the currency losses don’t affect the company’s net income – but it does have a negative impact upon the “book value” of the company, which is the presumed number that is compiled after the company’s liabilities are taken away from its assets.

So, who will you believe; the majority of experts or the dissenter who’s been right more often than not?