Citigroup's Strong Fourth-Quarter Performance Boosts Optimism Despite Revised Profitability Goals
Citigroup has delivered impressive results for its fourth-quarter earnings of 2024, surpassing expectations and signaling a brighter future for the banking giant. The bank reported net income of $2.86 billion, a significant rebound from a loss of $1.84 billion in the same period last year. This year-over-year improvement was largely driven by the resolution of challenges that had affected its previous earnings, including restructuring efforts undertaken in 2023.
A standout achievement for Citigroup is its remarkable 12% year-over-year growth in revenue, totaling $19.58 billion, surpassing analyst expectations. Earnings per share came in at $1.34, above the forecasted $1.22, marking a solid performance across multiple business units. The significant boost in revenue was propelled by impressive growth in investment banking, wealth management, and fixed-income trading, with the latter seeing a 37% increase in revenue.
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Investment banking was one of the major drivers, experiencing a 35% increase in revenue, reaching $925 million. The continued strong demand for investment-grade corporate debt was a key factor behind this success. Additionally, the markets business reported a 36% rise in revenue, totaling $4.58 billion, driven by strong performance in both equity and fixed income sectors. This positive momentum helped Citigroup expand its total banking revenue by 12%, with a remarkable 27% increase when accounting for loan hedges.
Despite these gains, Citigroup's leadership has revised its target for profitability. CEO Jane Fraser announced a lowered goal for return on tangible common equity (ROE), now expected to fall between 10% and 11% by 2026, down from the original target of 11% to 12%. While this adjustment raised concerns among analysts, Fraser emphasized that this revised figure should be seen as a "waypoint, not a destination." She reassured investors that Citigroup aims to surpass this target in the long term, driving greater shareholder value.
Fraser's strategy to overhaul Citigroup, which she set out when she became CEO, includes reshaping operations and strengthening internal controls. The bank's cost of credit declined significantly, down to $2.59 billion from $3.55 billion a year ago, showing its improved risk management practices. Furthermore, Citigroup's board authorized a $20 billion stock buyback program, underscoring the company's commitment to boosting shareholder returns.
Looking ahead, Citigroup plans to continue its transformation, despite facing the challenge of controlling costs. CFO Mark Mason indicated that expenses would decrease slightly in 2025, reflecting an ongoing focus on efficient operations. Moreover, the company’s investment in restructuring is expected to yield results in the coming years, with the potential IPO of Banamex, Citigroup’s Mexico retail business, possibly postponed until 2026.
Citigroup's strong fourth-quarter performance and its solid growth in key business sectors have propelled the bank’s shares to rise nearly 7%. In 2024, the stock gained nearly 37%, outperforming many competitors in the banking sector. With a comprehensive strategy in place, Citigroup remains optimistic about its ability to navigate the challenges of transformation and deliver long-term success for its investors.
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