Citigroup (C) recently reported Q4 2024 earnings, which beat the Street’s expectations. In a nutshell, segment performance was notably stronger than the prior year’s quarter, and the bank expects the robust performance to carry into 2025 and beyond. As such, I think that Citigroup remains one of the most attractively valued large U.S. banks, confirming my Buy rating for the shares.
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Insights from Citigroup’s Q4 2024 Segment Performance
Citigroup reports results for six main operating segments: U.S. Personal Banking (26.7% of Q4 2024 revenues), Services (26.4%), Markets (23.3%), Wealth (10.2%), Banking (6.3%), and “All Other (Managed Basis)” (6.9%) that includes former Legacy Franchises, global staff functions, and corporate treasury, among others.
All segments except “All Other (Managed Basis)” saw higher revenues in Q4 2024 relative to the prior-year quarter. Growth was strongest in the capital markets-sensitive segments — Markets, Wealth, and Banking — which benefited from elevated volatility during the last quarter of 2024. Expense growth was muted as Citigroup reaped the fruits of ongoing restructuring efforts. This allowed the bank to achieve positive operating leverage (revenue growth exceeding expense growth), a trend that is expected to continue into 2025.
The profitability of U.S. Personal Banking, the bank’s slowest growing segment, remained under pressure due to elevated provisions on cards. The Services segment remains the bank’s most profitable division, benefitting from higher revenues and low provisions. High accruals for losses in Mexico contributed to “All Other”-Managed Basis” posting a segment loss of $1.07 billion, accounting for an outsized 45% of the $2.4 billion total segment loss for the full year.
Citigroup’s Impressive Q4 Financials
For Citigroup as a whole, Q4 2024 revenue increased 12% year-over-year, operating expenses were 18% lower, and credit costs decreased 27%. The return on tangible equity (RoTCE) was 6.1%, below the 7% for the full year. This was due to typical seasonality and the outsized losses in legacy businesses in the “All Other”-Managed Basis” segment.
The tangible book value stood at $89.34/share, down 0.4% Q/Q, which was quite disappointing given robust operational performance and ongoing share repurchases. Likewise, the bank’s key capital metric, the CET1 ratio, declined by 0.1% quarter-over-quarter to 13.6%. Still, Citigroup’s capital position remains robust, with the CET1 requirement currently set at 12.1%.
The key driver behind the decline in tangible book values and capital was most probably the increase in long-term interest rates, which affected the bank’s securities portfolio reported under the held-for-trading approach. The portfolio’s duration (a measure of interest rate risk) is only two years, indicating the decline is likely to reverse in 2025-2026.
Citigroup Issues Strong 2025-2026 Outlook
Citigroup expects to achieve stronger profitability in 2025 and 2026, with RoTCE seen at 10-11% in 2026. The key driver of improved performance over the next two years will be operational leverage. For 2025 the bank expects:
- Revenue growth of 3-4%, driven by business growth and marginally higher net interest income. Given the ongoing decline in central bank interest rates, the forecast for higher net interest income is very positive.
- Expense decline of 0.4%, reflecting the non-recurrence of a regulatory charge and cost control measures. Most importantly, the forecast still incorporates $0.6 billion in restructuring expenses, which will gradually decline in the coming years.
I expect the positive operational leverage to boost earnings by roughly $2.3 billion, indicating a RoTCE of about 8% in 2025. As such, Citigroup should deliver full-year earnings of roughly $7.00/share, putting the P/E multiple at around 11 times. I still think this is attractive against the expectations for further profitability improvement in 2026 and beyond.
Is Citigroup Stock a Buy, According to Analysts?
Turning to Wall Street, Citigroup earns a Moderate Buy consensus rating on TipRanks based on 13 Buys and five Hold recommendations. There were no Sell ratings assigned on Citigroup stock in the past three months. Additionally, the average C stock price target is $88.09, implying about 13% potential upside.
The Takeaway
Citigroup reported strong results in Q4 2024, with all key business segments showing higher revenues relative to the prior-year quarter. While tangible book value and capital were impacted by higher interest rates, the bank’s outlook for 2025 is quite encouraging. I expect Citigroup to deliver a RoTCE of about 8% this year. Considering that results should improve further in 2026 and beyond, Citigroup remains one of the most attractively valued big U.S. banks. Thus, I confirm my Buy rating for the stock.
