Citigroup has cut its closely watched profitability target for 2026, as this lender is currently struggling with regulatory expenses that demonstrate the dynamic of growth.
At the same time, the mentioned financial institution, one of the largest in the United States banking sector and headquartered in New York City, announced a $20 billion share buyback program.
Citi’s profit in the fourth quarter of 2024 exceeded preliminary expectations regarding the corresponding performance of the lender for this period. The intensive upward dynamic of the mentioned indicator is related to the strength of the financial institution’s operations in the trading and dealmaking areas.
Amid earnings report the value of shares of Citi, the third largest bank in the United States, at trading showed a significant increase of 7.4%.
Jane Fraser, chief executive officer of the financial institution, said that last year was critical for the bank. She also noted that the results of the lender’s activities indicate that Citi’s strategy is being implemented in accordance with the plan and contributes to stronger performance in its businesses.
The financial institution lowered its target for return on tangible common equity (ROTCE) for next year to a range of 10% to 11% from the previous range of 11% to 12%. The head of the bank described the new target as a waypoint, but not a destination.
Citi chief financial officer Mark Mason, during a conversation with media representatives, said that the lender is investing more in addressing issues related to compliance. In this case, it implies regulatory sanctions for risk management and data governance. Mark Mason stated that the bank sees the need to increase investments in data transformation, technology, and improving the quality of information coming from Citi’s regulatory reporting.
In 2020, the Office of the Comptroller of the Currency and the Federal Reserve fined the lender $400 million for some risks and data failures. In July last year, the bank was fined again by regulators for insufficient progress in tackling the mentioned issues. The amount of the second fine was $136 million.
Citi’s board approved a $20 billion stock buyback program. In this case, management was allowed to buy back up to $1.5 billion during the first quarter of the current year. The financial institution did not provide a timeline for additional purchases.
Piper Sander analyst Scott Siefers, in a note to clients, stated that the scale of the mentioned program is a demonstration of force by Citi.
The bank’s net income for the fourth quarter of 2024 was recorded at the $2.9 billion mark. It is worth noting that in the same period of 2023, the financial institution fixed a loss of $1.8 billion.
The bank’s total revenue for the fourth quarter of 2024 was recorded at the $19.6 billion mark. For the same period in 2023, the corresponding figure was $17.4 billion.
Citi reported that in the last quarter of 2024, its profit was $1.34 per share on an adjusted basis. According to data compiled by LSEG, the average analyst forecast was for the mentioned figure to be $1.22.
Trading desks benefited from the sharp growth of US shares. In this context, it is worth mentioning that the S&P 500 reached an all-time high in the fourth quarter of 2024. Citi’s market revenue for the mentioned period was recorded at the $4.6 billion mark. This indicator increased by 36% year-on-year. The bank’s fixed income and equity markets revenue for the fourth quarter of 2024 grew by 37% and 34%, respectively, compared to figures for the same period in 2023.
Wall Street dealmakers have also cashed in on the revival in the area of mergers, acquisitions, and initial public offerings (IPOs) of shares after a kind of dry spell that lasted almost three years. In the second half of 2024, banks’ capital markets activity received a boost, which was because corporate clients issued more debt and equities.
Citi’s investment banking revenue for the fourth quarter of 2024 was recorded at the $925 million mark. This indicator showed an increase of 35% year-on-year.
According to data from Dealogic, global investment banking revenue reached $86.8 billion in 2024. This indicator increased by 26% year-on-year. Last year, Citi earned the fifth-highest fees across banks.
Mark Mason stated that corporate clients are active and he expects an uptick in dealmaking. According to him, the sentiment around the world is generally positive. He also stated that Citi’s clients are showing an optimistic attitude, despite the uncertainty regarding the policy of the incoming administration of US President-elect Donald Trump.
Overall banking revenue of the financial institution for the fourth quarter of 2024 was recorded at the $1.2 billion mark. This indicator showed an increase of 27% year-on-year.
In 2024, the value of Citi shares grew by 37%, outperforming the broader banking index and the equity markets. The corresponding dynamic is largely because investors have cheered Jane Fraser’s efforts to transform the financial institution. In 2023, she laid out a plan to grow profits, streamline operations, and fix long-standing deficiencies in risk management and data governance. Much of the reorganization of the financial institution was carried out last year.
Citi said it still expects to list shares of its Mexican unit Banamex on the stock markets of Mexico and the United States in the current year. At the same time, Jane Fraser told analysts regulatory approvals and market conditions may postpone the relevant transaction until 2026. Last month, Citi completed the separation of banking companies, which is necessary for listing.
The financial institution’s wealth management unit, an essential part of Jane Fraser’s growth strategy, generated revenue of $2 billion in the fourth quarter of 2024. This indicator increased by 20% year-on-year.
As we have reported earlier, U.S. Bancorp and PNC Predict Muted First-Quarter NII on Loan Demand.
