Citigroup’s stock (NYSE: C) has gained 23% YTD, as compared to the 9% rise in the S&P500 over the same period. Further, the stock is currently trading at $63 per share, which is 5% below its fair value of $67 – Trefis’ estimate for Citigroup’s valuation. 

Amid the current financial backdrop, C stock has seen little change, moving slightly from levels of $60 in early January 2021 to around $65 now, vs. an increase of about 40% for the S&P 500 over this roughly 3-year period. Notably, C stock has underperformed the broader market in each of the last 3 years. Returns for the stock were -2% in 2021, -25% in 2022, and 14% in 2023. In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 24% in 2023 – indicating that C underperformed the S&P in 2021, 2022, and 2023. In fact, consistently beating the S&P 500 – in good times and bad – has been difficult over recent years for individual stocks; for heavyweights in the Financials sector including JPM, V, and MA, and even for the megacap stars GOOG, TSLA, and MSFT. In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics. Given the current uncertain macroeconomic environment with high oil prices and elevated interest rates, could C face a similar situation as it did in 2021, 2022, and 2023 and underperform the S&P over the next 12 months – or will it see a strong jump?

The bank surpassed the street estimates in the first quarter of 2024. It reported total revenues of $21.1 billion – down 2% y-o-y. The top line was down due to a 4% drop in the wealth management segment, a 5% decrease in the sales & trading business, and a 9% decline in all other units. However, the impact was almost offset by an 8% rise in services (treasury & trade solutions, security services), a 49% jump in banking (investment banking and corporate lending), and a 10% gain in personal banking divisions. On the cost front, the provisions for credit losses and total operating expenses as a % of revenues witnessed an unfavorable increase in the quarter. Overall, the net income decreased 27% y-o-y to $3.37 billion.

The bank’s top line grew 4% y-o-y to $78.5 billion in FY 2023. It was primarily due to a 16% rise in services, a 14% increase in personal banking, and a 4% gain in all other categories. That said, the positive impact was somewhat offset by a 6% decline in sales & trading, a 15% drop in banking, and a 5% decrease in wealth management segments. In terms of expenses, the provisions figure jumped 75% y-o-y to $9.19 billion. Further, total operating expenses increased 10% y-o-y. Altogether, Citigroup’s net income declined 38% y-o-y to $9.23 billion.

Moving forward, we expect the same trend to continue in Q2. Overall, we estimate Citigroup’s revenues to touch $80.7 billion in FY2024. Additionally, C’s adjusted net income margin is likely to improve in the year, leading to an annual GAAP EPS of $5.81. This coupled with a P/E multiple of just below 12x will lead to a valuation of $67.

[1] Returns as of 5/10/2024
[2] Cumulative total returns since the end of 2016

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.