Citigroup Earnings Call: Record Revenues, Returns Rising

Citigroup Inc ((C)) has held its Q4 earnings call. Read on for the main highlights of the call.

Citigroup Earnings Call Highlights: Strong Progress, Manageable Pressures

Citigroup’s latest earnings call painted a picture of a bank in clear forward motion, combining its strongest organic revenue growth in more than a decade with record performance across all five core businesses and robust capital returns. Management emphasized improving returns, visible progress on its multi‑year transformation and rapid AI adoption. At the same time, they acknowledged headwinds from Russia‑related accounting impacts, higher expenses, and rising credit losses concentrated in U.S. cards and Mexican consumer loans, as well as some near‑term revenue volatility in markets and retail services.

Adjusted EPS and Return Improvement

Citigroup reported adjusted fourth‑quarter EPS of $1.81 and an adjusted return on tangible common equity (ROTCE) of 7.7%. For the full year, adjusted ROTCE improved to 8.8%, a 180‑basis‑point gain after stripping out the effects of Banamex and Russia, underscoring real traction in profitability. Adjusted net income topped $16 billion, signaling that the underlying earnings engine is strengthening even as reported figures remain clouded by one‑time items.

Top-Line Growth and Record Revenues

Full‑year reported revenue came in at about $85.2 billion, or $86.6 billion on an adjusted basis, equating to roughly 7% organic growth — the strongest in over ten years. Each of Citi’s five business segments delivered record revenues and positive operating leverage, marking the second consecutive year that the firm expanded revenue faster than costs both at the business and enterprise level. This broad‑based top‑line performance highlights a franchise that is growing across cycles rather than relying on a single engine.

Payments, Treasury and Securities Services Momentum

Citi’s services franchise – particularly treasury and security services – remains a crown jewel. Assets under custody and administration in securities services grew around 24%, reflecting strong client activity and share gains. Cross‑border transaction values rose by double digits, while treasury and trade solutions (TTS) innovations such as Citi Token and Payments Express drove higher product adoption and market penetration. The services unit delivered a standout ROTCE above 28% for the year, underscoring its role as a high‑return, capital‑light growth driver.

Markets and Equities Strength

In markets, Citigroup posted record full‑year revenues, surpassing even the elevated levels seen in 2020. Fixed income trading revenue rose about 10% despite weakness in commodities, demonstrating resilience across rates and credit. Equities revenues reached a record $5.7 billion, supported by more than 50% growth in prime balances. Together, these trends translated into a solid Markets ROTCE of roughly 11.6% for the year, reinforcing Citi’s competitive position in global trading.

Banking and Investment Banking Outperformance

Investment banking was a bright spot, reflecting a rebound in deal activity. Fees rose 35% year over year, with M&A fees up about 84%, delivering both a record quarter and full year. Debt capital markets (DCM) fees increased roughly 19% as issuance picked up. Citi gained both wallet share and overall market share while keeping expenses in check, enabling its banking franchise to generate an approximate 11.3% ROTCE and sizable revenue growth without sacrificing cost discipline.

Wealth and U.S. Personal Banking Progress

Wealth management continued to build scale, with revenues up about 14% and organic net new investment assets expanding around 8% for the year. Client investment assets also rose roughly 14%, pointing to increasing engagement and cross‑sell. In U.S. Personal Banking, branded cards revenue advanced about 8%, and returns in the business more than doubled to the mid‑teens ROTCE range for the full year. This combination of faster growth and better profitability indicates that Citi’s consumer strategy in key markets is gaining traction.

Strong Capital Return and Robust Capital Ratios

Citigroup leaned into capital returns, repurchasing over $13 billion of common stock in 2025, including $4.5 billion in the fourth quarter, as part of a $20 billion buyback program. Total capital returned to shareholders exceeded $17.5 billion when dividends are included. The bank’s preliminary CET1 ratio stood at about 13.2%, roughly 160 basis points above its regulatory requirement, while its liquidity coverage ratio averaged around 115% with more than $1 trillion in available liquidity. This cushion gives management flexibility to keep returning capital while absorbing regulatory and credit uncertainties.

Transformation, Controls and AI Adoption

Management highlighted tangible progress on Citi’s transformation and control agenda. More than 80% of transformation programs are now at or near their target state, and a key regulatory article was terminated in December, signaling improved oversight and risk management. On the technology front, AI and proprietary tools have been deployed widely, used over 21 million times across 84 countries with adoption levels above 70%. The firm is automating more than 50 large, complex processes, aiming to boost efficiency, reduce operational risk, and support the push toward a lower cost base over time.

Reported vs. Adjusted Results and Russia Impact

The gap between reported and adjusted results was particularly visible this quarter due to the held‑for‑sale accounting treatment of Russia. Reported Q4 net income was $2.5 billion, or $1.19 per share, with a ROTCE of 5.1%, versus adjusted net income of $3.6 billion, EPS of $1.81, and ROTCE of 7.7%. Reported revenues rose just 2% year on year, while adjusted revenues increased 8%. Management stressed that these Russia‑related effects are largely non‑core and that investor focus should be on the underlying operating momentum.

Rising Expenses and One-Time Charges

Expenses remained a key pressure point. Fourth‑quarter expenses were $13.8 billion, up roughly 6%, driven by higher compensation, tax and legal costs, and increased technology investments. Full‑year expenses totaled $55.1 billion, or $54.4 billion excluding the Banamex goodwill impairment, and included about $800 million of severance tied to ongoing restructuring. The adjusted efficiency ratio sits at around 63% for the year, with management targeting roughly 60% by 2026. The challenge will be maintaining investment in growth and controls while delivering that step‑down in costs.

Credit Costs Concentrated in Cards and Mexico Consumer

Credit costs are normalizing off unusually benign levels and are concentrated in consumer exposures. The firm’s cost of credit was $2.2 billion in the fourth quarter, primarily reflecting net credit losses in U.S. cards. For the year, branded cards net credit losses were about 3.6%, and retail services losses were around 5.73%, consistent with management guidance and the higher‑yield nature of those portfolios. Consumer loan losses in Mexico also contributed significantly to cost of credit in the all‑other segment. Citi holds more than $21 billion in reserves, equating to a reserve‑to‑funded loan ratio of roughly 2.6%, providing a buffer against further credit normalization.

Markets and Noninterest Revenue Volatility

Despite strong full‑year results, quarterly performance in markets and noninterest revenue lines showed some volatility. Total markets revenues declined about 1% in the quarter due to a tough comparison with a strong prior‑year period. Noninterest revenues excluding markets fell roughly 17% on a reported basis, though they were up on an adjusted basis once notable items were removed. These swings highlight Citi’s exposure to fee‑driven and trading‑related income, where market conditions and one‑offs can cause short‑term noise even as the strategic trend remains positive.

Retail Services Softness and Slower Wealth Inflows

Not all consumer segments fired on all cylinders. Retail services revenues declined around 7% in the quarter, reflecting weaker foot traffic and sales at certain retail partners, which weighed on volumes. In Wealth, net new investment assets slowed to $7.2 billion in the fourth quarter, which management attributed in part to seasonality. While these trends may prove temporary, they underscore that some client‑facing businesses are facing near‑term demand headwinds and competitive pressures.

Ongoing Regulatory and Divestiture Uncertainty

Although Citi has cleared important milestones on the regulatory front, including the termination of a key oversight article and the sale of a 25% stake in Banamex, management stressed that the final timing of full consent‑order resolution remains in regulators’ hands. Further divestitures and potential equity offerings tied to the Banamex transaction and other exits are also subject to approval and market conditions. Investors should expect some residual uncertainty and execution risk as Citi completes this multi‑year simplification plan.

Guidance and Outlook: Pushing Toward Double-Digit ROTCE

Looking ahead to 2026, Citigroup guided to 5–6% growth in net interest income excluding markets, following nearly 6% growth in 2025, supported by mid‑single‑digit increases in both loans and deposits, particularly in services and wealth. The bank is targeting an efficiency ratio around 60%, underpinned by another year of firm‑wide positive operating leverage and ongoing transformation benefits, and aims for a ROTCE in the 10–11% range. Markets revenues are expected to be roughly flat year on year, but fee income outside markets should continue to rise and support non‑interest revenue momentum. Management expects card net credit losses to remain within 2025 guidance ranges and plans to continue share repurchases under the $20 billion program, while gradually moving its CET1 management buffer toward roughly 100 basis points above requirements, implying an eventual CET1 ratio near 12.6%.

Citigroup’s earnings call delivered a clear message: the bank is growing faster, generating better returns, and returning significant capital, even as it works through higher expenses, normalizing credit costs, and lingering regulatory and divestiture uncertainties. Record revenues across all major businesses, strong services and markets franchises, and visible transformation progress underpin management’s confidence in reaching double‑digit ROTCE over the next couple of years. For investors, Citi remains a self‑help story with improving fundamentals, but one that still requires careful monitoring of credit trends, cost execution, and regulatory milestones.