Citigroup's turnaround continues as stock stands to be a big winner in 2025

Citigroup delivered strong fourth-quarter results, posting earnings per share (EPS) of $1.34, exceeding the consensus estimate of $1.30, while revenue of $19.6 billion came in slightly below the expected $19.7 billion. The revenue marked a 12% year-over-year increase, driven by growth across all business segments and reduced impacts from Argentina's currency devaluation. Net income surged to $2.9 billion, reversing a $1.8 billion loss in the same period last year, reflecting improved cost management and stronger revenue generation.

Economic Commentary and Key Metrics

CEO Jane Fraser highlighted continued progress in simplifying operations, enhancing efficiency, and leveraging technology to position Citigroup for sustained growth. She noted that the global economic backdrop remains supportive, with manageable credit trends and opportunities for further operational enhancements. Citigroup’s net interest income (NII) grew modestly to $13.73 billion, surpassing estimates of $13.45 billion. Total loans ended the quarter at $694.5 billion, with growth in U.S. Personal Banking (USPB) and institutional services offset by slight declines in other areas. Expenses decreased significantly by 18% year-over-year to $13.2 billion, primarily due to the absence of prior year charges like the FDIC special assessment and restructuring costs.

Net charge-offs (NCOs) were $2.24 billion, slightly below the $2.33 billion forecast. Credit costs totaled $2.6 billion, reflecting an allowance for credit losses (ACL) build driven by credit card growth. Citigroup’s CET1 ratio remained strong at 13.6%, close to expectations, ensuring a solid capital position to fund share repurchases and future growth initiatives.

Segment Performance

In Consumer & Community Banking, revenues rose 7% year-over-year, supported by robust performance in U.S. Personal Banking, which generated $5.23 billion in revenue. Credit card lending showed notable strength, with higher revolving balances and increased card income on elevated transaction volumes. Home lending revenue climbed 2%, bolstered by improved mortgage banking fees, while auto lending faced a 10% decline due to shrinking balances and compressed margins.

The Investment Banking division delivered standout results. Revenues in the segment climbed 27% year-over-year, with investment banking revenue surging 35% to $925 million, driven by strong performance across equity capital markets (ECM), debt capital markets (DCM), and advisory. ECM benefited from heightened IPO and secondary issuance activity, while DCM was supported by investment-grade issuance momentum. Fixed Income, Currency, and Commodities (FICC) trading revenue increased 37% to $3.48 billion, significantly surpassing expectations of $2.94 billion. Equity trading revenue rose 34% to $1.1 billion, in line with estimates, driven by strong cash equity flows.

Balance Sheet and Efficiency

Citigroup’s end-of-period deposits totaled $1.28 trillion, down 2% year-over-year due to reduced balances in markets and wealth management. The efficiency ratio improved to 67.3%, reflecting continued benefits from organizational simplification initiatives. Book value per share rose 3% to $101.62, while tangible book value per share increased 4% to $89.34, highlighting the bank’s improving financial position.

The bank also announced a significant $20 billion share repurchase program, reflecting management's confidence in its ability to generate future capital and meet return targets. In Q4 alone, Citigroup repurchased $1.5 billion in stock, contributing to a strong total capital return of $2.1 billion for the quarter.

Outlook and Turnaround Story

Looking ahead, Citigroup expects revenue of $83.5-$84.5 billion in 2025, with NII excluding markets projected to grow modestly. Expenses are forecast to decrease slightly from $53.8 billion in 2024, as efficiency initiatives and technology investments continue to yield benefits. The bank targets a return on tangible common equity (RoTCE) of 10-11% by 2026, demonstrating a clear path toward sustainable profitability.

Citigroup’s turnaround under CEO Jane Fraser has gained traction, with analysts viewing the stock as a top pick for 2025 due to its undervaluation relative to peers. Shares remain attractively priced at a significant discount to tangible book value, presenting a compelling opportunity for long-term investors. With robust growth in trading revenues, disciplined expense management, and a focus on simplifying operations, Citigroup is well-positioned to achieve its medium-term financial targets and regain market confidence.

Shares of C are eyeing a test of the $83 level, marking a five year high in shares and a massive level of resistance on the monthly charts. This lines up well for a breakout candidate and a potential big winner in 2025 if Frasier & Co can sustain the turnaround.

In summary, Citigroup’s Q4 performance highlights significant progress in its transformation journey. Strong investment banking results, coupled with effective cost controls and a resilient balance sheet, underscore the bank’s ability to navigate a complex economic environment. As it continues to execute on its strategic priorities, Citigroup’s undervalued stock offers significant upside potential, making it a favorite among analysts for the coming year.