Citigroup Inc. C is slated to report fourth-quarter 2024 results on Jan. 15, 2025, before market open.
Among Citigroup’s close peers, JPMorgan JPM and Wells Fargo & Company WFC are also scheduled to announce quarterly numbers on Jan. 15.
Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.
In the third quarter, Citigroup witnessed a rise in total loans and deposits balance. The company registered a solid increase in Investment Banking (IB) revenues. However, rise provisions for credit losses were a concern.
This globally diversified financial services holding company is expected to register a bottom- and top-line increase in the to-be-reported quarter. An increase in loan balances, along with improved IB activities, is likely to have aided C’s financials in the fourth quarter. Yet, rising provisions for credit losses and increased investment in technological developments and transformation expenses are expected to have hampered the bank’s performance.
The Zacks Consensus Estimate for fourth-quarter revenues is pegged at $21.02 billion, indicating a year-over-year rise of 3.3%.
In the past month, the consensus estimate for earnings for the to-be-reported quarter has been revised upward to $1.25. The figure indicates a 48.8% rise from the prior-year quarter’s tally.
Estimate Revision Trend
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The company also has an impressive earnings surprise history. Its earnings outpaced the Zacks Consensus Estimate in each of the trailing four quarters, with the average surprise being 19.04%.
Earnings Surprise History
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Factors to Influence Citigroup’s Q4 Results
NII: In the fourth quarter, the Federal Reserve reduced interest rates by 50 basis points to a range of 4.25-4.5%. Combined with the rate cut in September, this is likely to have supported Citigroup’s NII as funding/deposit costs are expected to have declined.
Management expects fourth-quarter NII (excluding Markets) to be flat from the $13.3 billion reported in the third quarter of 2024.
The Zacks Consensus Estimate for NII for the fourth quarter is pinned at $13.4 billion, suggesting a 3% year-over-year decline.
Loans: Greater clarity about the Fed's rate cut trajectory, coupled with a stabilizing macroeconomic environment, is likely to have improved lending conditions. According to the Fed's recent data, demand for commercial and industrial, and consumer loans was solid during the fourth quarter of 2024.
Hence, C is expected to have witnessed a decent rise in loan demand, thereby improving the average interest-earning assets balance.
The Zacks Consensus Estimate for average interest-earning assets in the fourth quarter of 2024 is pegged at $2.28 trillion, indicating a 2.3% increase from the prior-year quarter’s reported figure.
Fee Income: Global mergers and acquisitions (M&As) experienced strong growth in the fourth quarter of 2024. Deal value and volume were bolstered by solid financial performance, robust U.S. economic growth, buoyant markets and interest rate cuts. The anticipation of reduced regulatory oversight on M&As under the incoming Trump administration further fueled deal-making activity, while signs of recovery were evident in the capital markets. Yet, lingering geopolitical issues were a headwind.
At the Goldman Sachs U.S. Financial Services Conference held in December 2024, Citigroup's CFO, Mark Mason, projected a 25% to 30% increase in IB fees for the fourth quarter compared to the same period in the previous year. He attributed this optimism to increased IB activity, particularly in debt underwriting, and highlighted the resilience of the global economy, noting strength in both consumer and corporate sectors in the United States.
Client activity and market volatility were solid in the fourth quarter. The likelihood of a strong economic expansion, gradually cooling inflation and easing monetary policy drove the client activity. Further, volatility was high in equity markets and other asset classes, including commodities, bonds and foreign exchange. Citigroup anticipates market revenues to grow by a high-teens percentage in the fourth quarter on a year-over-year basis.
The Zacks Consensus Estimate for income from commissions and fees in the fourth quarter of 2024 is pegged at $2.57 billion, which suggests a 16.1% increase on a year-over-year basis.
Also, the Zacks Consensus Estimate for income from principal transactions in the fourth quarter of 2024 is pegged at $2.93 billion, which increased significantly from $1.47 billion recorded in the prior-year quarter.
The Zacks Consensus Estimate for administration and other fiduciary fees for the fourth quarter of 2024 is pegged at $850 million, which indicates a year-over-year decline of 8.1%.
The Zacks Consensus Estimate for total non-interest income for the fourth quarter of 2024 is pegged at $6.16 billion, which indicates a 70.4% increase from the prior-year quarter.
Expenses: The continued investment in the transformation of its underlying technology, risk management and internal controls as part of remediation highlighted by the Office of the Comptroller of the Currency and the Federal Reserve is expected to have kept the expense base elevated in the fourth quarter.
Asset Quality: The company is likely to have set aside a huge amount of money for potential delinquent loans, given the expectations of higher for longer interest rate backdrop.
The Zacks Consensus Estimate for non-accrual loans is pegged at $3.44 billion, indicating a surge of 58.6% from the prior year’s reported figure.
What Our Model Unveils for Citigroup
Per our proven model, the chances of Citigroup beating estimates this time are low. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. This is not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Citigroup has an Earnings ESP of -0.36% and a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Citigroup’s Price Performance & Valuation
In the fourth quarter, Citigroup shares have gained 13.9% compared with the industry and the S&P 500 Index’s growth of 17.4% and 3.7%, respectively. Shares of JPM and WFC have gained 15.8% and 26.8%, respectively, in the same period.
Price Performance
Image Source: Zacks Investment Research
Now, let’s look at the value Citigroup offers investors at current levels.
Currently, C is trading at 9.9X forward 12-month earnings, below the industry’s forward earnings multiple of 13.66X. The company’s valuation looks inexpensive compared with the industry average.
Price-to-Earnings (forward 12 Months)
Image Source: Zacks Investment Research
Investment Thesis on Citigroup
Citigroup has been streamlining operations internationally to enhance its focus on core areas and drive fee-based income growth. In sync with this, in December 2024, it completed the separation of its institutional banking operations in Mexico from its consumer businesses. Further, in June 2024, Citigroup sold its China-based onshore consumer wealth portfolio to HSBC China — a wholly owned subsidiary of HSBC Holdings plc. With these initiatives, the company projects revenues to witness a compound annual growth rate (CAGR) of 4-5% by 2026-end.
Also, the company is executing a sweeping overhaul of the bank to enhance its performance, reduce costs, and simplify business operations. In sync with this, in January 2024, C announced the plan to eliminate 20,000 jobs as part of its broad-scale restructuring effort over the next two years. Through such moves, Citigroup is expected to drive $2-$2.5 billion of annualized run rate savings by 2026.
Also, Citigroup’s deal with Apollo to establish a $25-billion private credit and direct lending program looks encouraging. Additionally, the company’s initiative to accelerate its digital strategy will help it attract and retain customers and boost cross-selling opportunities, positioning it for long-term growth.
However, the company is witnessing a rise in credit losses. In a recent SEC filing, Citigroup’s subsidiary, Citibank N.A., disclosed a rise in its credit card trust delinquency and net charge-off rates for November 2024 compared with October 2024. Nonetheless, both the metrics remained under their pre-pandemic levels despite the recent uptick.
Final Thoughts on Citigroup
As Citigroup prepares to announce its fourth-quarter 2024 earnings, the Fed’s interest rate cut trajectory and improving lending scenario could present a favorable picture for the bank.
Though the increased expenses and credit losses remain areas of concern, the company's ongoing organizational restructuring and streamlining of international operations will boost its financial performance and optimize its operations over the long run. Additionally, its investment in digital platforms further enhances this growth trajectory.
Hence, investors can consider parking their cash in Citigroup stock at its current price levels for healthy returns.
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