Citigroup Shifts Focus: Share Buybacks and Revised Profitability Targets
In a strategic move to revitalize the bank, Citigroup Inc. has adjusted its profitability goals, while offering investors a sweetener in the form of share buybacks. This shift in focus comes as the lender struggles to contain costs amidst a global overhaul of its operations and strengthening of internal controls.
Revised Profitability Targets: A New Reality
Citigroup now expects its return on tangible common equity to be between 10% and 11% by the end of next year, down from its previous forecast of 11% to 12%. This revised target is a sign that the bank is facing challenges in keeping expenses in check while implementing its transformation plan.
Investing in Growth
Despite the revised target, Citigroup’s costs are expected to remain relatively high, with the bank forecasting only a slight decrease in expenses for 2025 compared to the $53.8 billion spent in 2024. However, the lender is committed to investing in its businesses, which is expected to drive growth in the long run.
Share Buybacks: A Boost for Investors
In a move to appease shareholders, Citigroup’s board of directors has authorized a program to repurchase $20 billion worth of stock in the coming years. This will unleash billions of excess capital, providing a welcome boost to investors. Shares responded positively, rising 5.1% to $73.25 in early New York trading.
Stronger-than-Expected Results
Citigroup’s revised target was overshadowed by stronger-than-expected results for the fourth quarter. The bank hit revenue and expense guidance for 2024, and expects revenue for 2025 to rise to $83.5 billion to $84.5 billion. Net income was $2.9 billion, or $1.34 a share, beating analyst estimates.
Business Lines Thrive
Revenue rose across all five of Citigroup’s main business lines in the quarter, with fixed income trading revenue soaring 37% to $3.5 billion and equities trading revenue climbing 34% to $1.1 billion. While corporate lending and debt underwriting revenues were lower than expected, the firm’s investment bankers and equity underwriters topped predictions.
CEO’s Vision: A Five-Year Turnaround
Citigroup’s CEO, Jane Fraser, has reiterated her commitment to executing a five-year turnaround of the bank, which is currently the only major US bank worth less than it was a half-decade ago. With the revised target, Fraser aims to improve returns well above the current level and deliver the bank’s full potential for shareholders.
Leave a Reply