Citigroup Delivers Strong Q2, Raises Full-Year Outlook as Markets and Banking Shine

Citigroup posted a robust set of second-quarter results, comfortably beating Wall Street expectations on both earnings and revenue, while nudging its full-year guidance higher. EPS came in at $1.96 versus the $1.60 consensus, and revenue reached $21.67 billion, exceeding the $21.0 billion estimate. The strong showing was driven by broad-based strength across the franchise—including Markets, Banking, and Wealth—and reinforced CEO Jane Fraser’s ongoing transformation strategy. Despite rising credit costs and expense pressures, the bank achieved positive operating leverage for the fourth consecutive quarter.

Net Interest Margin and Income Trends

Citigroup reported a net interest margin (NIM) of 2.14%, flat quarter-over-quarter but down slightly from 2.18% a year ago. While asset yields held up, higher funding costs offset some of the benefit, reflecting continued competition for deposits. Net interest income (NII) rose 12% year-over-year to $13.6 billion, supported by 5% loan growth, particularly in branded cards, wealth, and services. The bank cited strength in interest-earning balances, especially within U.S. Personal Banking and Wealth segments, as well as tailwinds from higher rates and prudent asset mix management.

Non-Interest Income Performance

Non-interest income dipped 1% year-over-year, as weakness in areas like Retail Banking and Services was more than offset by strength in Investment Banking and Wealth. Markets revenue surged 16% to $5.9 billion, the highest Q2 result since 2020. Fixed income trading delivered a 20% gain to $4.3 billion, benefiting from elevated client activity in rates and currencies, while equities revenue rose 6% on growth in prime services and derivatives. Investment banking revenue grew 15%, with advisory fees soaring 52%—a sign of recovering M&A and ECM pipelines. Wealth revenue increased 20%, supported by strong investment fee growth and client asset inflows.

Credit Quality and Loan Performance

Credit costs rose 16% year-over-year to $2.9 billion, reflecting a higher net build in the allowance for credit losses (ACL). The total ACL stood at $23.7 billion, up from $21.8 billion a year ago. Consumer non-accrual loans rose 30% due to mortgage delinquencies tied to California wildfires, while commercial NPLs jumped 73%, driven by idiosyncratic downgrades in the Markets business. Net charge-offs were stable, but the uptick in provisioning suggests Citi remains cautious about the macro backdrop—particularly around tariffs and consumer health.

Capital and Shareholder Returns

Citigroup ended the quarter with a CET1 ratio of 13.5%, up from 13.4% last quarter and well above regulatory minimums. The bank returned $3.1 billion to shareholders during the quarter, including $2 billion in share buybacks. It also raised the quarterly dividend to $0.60 per share. Book value per share increased 7% year-over-year to $106.94, while tangible book value per share climbed 8% to $94.16. The strength in capital generation reflects both solid earnings and disciplined balance sheet management.

Efficiency and Cost Control

The efficiency ratio improved slightly to 62.7%, as revenue growth outpaced expense growth. Operating expenses rose just 2% to $13.6 billion, supported by cost discipline in tax/legal-related categories and early benefits from restructuring. The bank incurred $400 million in severance costs tied to a realignment of the tech workforce, but productivity savings and stranded cost reductions helped absorb that pressure. Notably, all five core businesses posted positive operating leverage.

Deposits, Loans, and Balance Sheet Dynamics

End-of-period deposits totaled $1.4 trillion, up 6% year-over-year, with growth in Services and USPB offsetting softness in Wealth. Loans rose 5% to $725.3 billion, led by growth in branded cards, retail banking, and markets-related lending. Citi continued to optimize its asset mix by focusing on higher-yielding products and reducing exposure to low-spread assets.

Trading and Market Risk

Citigroup’s Markets division capitalized on volatility across asset classes. FICC trading jumped 20%, led by increased demand in rates and FX. Equity trading rose 6%, helped by prime brokerage activity and improved derivative monetization. The strong performance bodes well for peers like Goldman Sachs and Morgan Stanley, who report later this week.

Macro Commentary and Outlook

CEO Jane Fraser noted that Services remained the “crown jewel” of Citi’s business, and that transformation efforts were beginning to yield operating leverage. The bank raised its full-year revenue guidance to $84 billion, the high end of prior forecasts. While management expects consumer spending to cool in the back half of the year—especially as tariffs begin to bite—recession fears have abated somewhat. Citi is also seeing renewed M&A and capital markets activity, positioning the firm for a stronger H2.

Investor Takeaways

Citigroup’s stock rose more than 3% post-earnings, extending its year-to-date rally to nearly 25%. Investors welcomed the beat on both revenue and EPS, continued cost discipline, and upbeat guidance. While credit costs and macro headwinds remain, Citi’s diversified model and strategic realignment under Fraser continue to show results. With positive momentum across trading, banking, and wealth, Citi appears to be in one of its strongest positions in years.

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