Citigroup (C)

Global financial services giant Citigroup (NYSE:C) beat Wall Street’s revenue expectations in Q3 CY2025, with sales up 9.3% year on year to $22.09 billion. Its GAAP profit of $1.86 per share was 8% above analysts’ consensus estimates.

Company Overview

With operations in nearly 160 countries and a history dating back to 1812, Citigroup (NYSE:C) is a global financial services company that provides banking, investment, wealth management, and payment solutions to consumers, corporations, and governments.

At their core, diversified banks take in deposits and engage in various forms of lending, which means revenue is generated through interest rate spreads (difference between loan and deposit rates) and fees. Other revenue comes from adjacent services such as wealth management, card and account fees, and products such as annuities. These institutions benefit from rising interest rates that improve NIMs (net interest margins), digital transformation reducing operational costs, and expanding wealth management services as populations age. However, they face headwinds including fintech competition disrupting traditional models (how disruptive is crypto?), stringent regulatory requirements increasing compliance costs, and cybersecurity threats requiring substantial technology investments. Economic downturns also pose risks through potential loan defaults and compressed margins during accommodative monetary policy periods.

Citigroup competes with other global financial institutions including JPMorgan Chase (NYSE:JPM), Bank of America (NYSE:BAC), Wells Fargo (NYSE:WFC), and Goldman Sachs (NYSE:GS) in the U.S., as well as international banks like HSBC (NYSE:HSBC) and Deutsche Bank (NYSE:DB).

Net interest income and and fee-based revenue are the two pillars supporting bank earnings. The former captures profit from the gap between lending rates and deposit costs, while the latter encompasses charges for banking services, credit products, wealth management, and trading activities. Unfortunately, Citigroup’s 1.9% annualized revenue growth over the last five years was tepid. This fell short of our benchmarks and is a rough starting point for our analysis.

Long-term growth is the most important, but within financials, a half-decade historical view may miss recent interest rate changes and market returns. Citigroup’s annualized revenue growth of 3.6% over the last two years is above its five-year trend, but we were still disappointed by the results. Note: Quarters not shown were determined to be outliers, impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.

This quarter, Citigroup reported year-on-year revenue growth of 9.3%, and its $22.09 billion of revenue exceeded Wall Street’s estimates by 4.6%.

Net interest income made up 65.1% of the company’s total revenue during the last five years, meaning lending operations are Citigroup’s largest source of revenue.

Markets consistently prioritize net interest income growth over fee-based revenue, recognizing its superior quality and recurring nature compared to the more unpredictable non-interest income streams.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Citigroup’s EPS grew at a remarkable 7.6% compounded annual growth rate over the last five years, higher than its 1.9% annualized revenue growth. However, this alone doesn’t tell us much about its business quality because its efficiency ratio didn’t improve.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For Citigroup, its two-year annual EPS growth of 6.3% was lower than its five-year trend. We still think its growth was good and hope it can accelerate in the future.

In Q3, Citigroup reported EPS of $1.86, up from $1.51 in the same quarter last year. This print beat analysts’ estimates by 8%. Over the next 12 months, Wall Street expects Citigroup’s full-year EPS of $7.12 to grow 27.9%.

Banks are balance sheet-driven businesses because they generate earnings primarily through borrowing and lending. They’re also valued based on their balance sheet strength and ability to compound book value (another name for shareholders’ equity) over time.

Because of this, tangible book value per share (TBVPS) emerges as the critical performance benchmark. By excluding intangible assets with uncertain liquidation values, this metric captures real, liquid net worth per share. Other (and more commonly known) per-share metrics like EPS can sometimes be murky due to M&A or accounting rules allowing for loan losses to be spread out.

Citigroup’s TBVPS grew at a decent 5.9% annual clip over the last five years. The last two years show a similar trajectory as TBVPS grew by 4.9% annually from $86.93 to $95.72 per share.

Over the next 12 months, Consensus estimates call for Citigroup’s TBVPS to grow by 8.1% to $103.46, decent growth rate.

Leverage is core to a financial firm’s business model (loans funded by deposits). To ensure economic stability and avoid a repeat of the 2008 GFC, regulators require certain levels of capital and liquidity, focusing on the Tier 1 capital ratio.

Tier 1 capital is the highest-quality capital that a firm holds, consisting primarily of common stock and retained earnings, but also physical gold. It serves as the primary cushion against losses and is the first line of defense in times of financial distress.

This capital is divided by risk-weighted assets to derive the Tier 1 capital ratio. Risk-weighted means that cash and US treasury securities are assigned little risk while unsecured consumer loans and equity investments get much higher risk weights, for example.

New regulation after the 2008 financial crisis requires that all firms must maintain a Tier 1 capital ratio greater than 4.5%. On top of this, there are additional buffers based on scale, risk profile, and other regulatory classifications, so that at the end of the day, firms generally must maintain a 7-10% ratio at minimum.

Over the last two years, Citigroup has averaged a Tier 1 capital ratio of 12.2%, which is considered safe and well capitalized in the event that macro or market conditions suddenly deteriorate.

Return on equity, or ROE, quantifies bank profitability relative to shareholder equity - an essential capital source for these institutions. Over extended periods, superior ROE performance drives faster shareholder wealth compounding through reinvestment, share repurchases, and dividend growth.

Over the last five years, Citigroup has averaged an ROE of 8%, respectable for a company operating in a sector where the average shakes out around 7.5% and those putting up 15%+ are greatly admired.

We enjoyed seeing Citigroup beat analysts’ revenue expectations this quarter. We were also glad its EPS outperformed Wall Street’s estimates. Overall, we think this was a decent quarter with some key metrics above expectations. The stock remained flat at $96.98 immediately following the results.

Updated: December 3, 2025 at 11:54 PM EST

A common mistake we notice when investors are deciding whether to buy a stock or not is that they simply look at the latest earnings results. Business quality and valuation matter more, so we urge you to understand these dynamics as well.

We cheer for all companies supporting the economy, but in the case of Citigroup, we’ll be cheering from the sidelines. To begin with, its revenue growth was weak over the last five years. And while its projected EPS for the next year implies the company’s fundamentals will improve, the downside is its net interest margin limits its operating profit potential compared to other banks that can earn more, all else equal.. On top of that, its estimated net interest income for the next 12 months are weak.

Citigroup’s P/B ratio based on the next 12 months is 0.9x. While this valuation is reasonable, we don’t see a big opportunity at the moment. There are superior stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $114.33 on the company (compared to the current share price of $106.67).