Citigroup’s stock has seen a 23% year-to-date gain, outperforming the S&P500’s 9% increase. However, the stock is trading below its fair value of $67 per share, according to Trefis’ valuation estimate. Despite the recent financial backdrop, Citigroup’s stock has seen little change in the past 3 years, underperforming the broader market in each of those years. Returns for the stock were -2% in 2021, -25% in 2022, and 14% in 2023, as compared to returns of 27%, -19%, and 24% for the S&P 500 during the same period. Trefis’ High Quality Portfolio, on the other hand, has consistently outperformed the S&P 500 each year over the same period, with a collection of 30 stocks providing better returns with less risk.
In the first quarter of 2024, Citigroup reported total revenues of $21.1 billion, down 2% year-over-year. This decline was primarily due to decreases in the wealth management and sales & trading segments, offset by increases in services, banking, and personal banking divisions. However, the bank’s net income decreased 27% year-over-year to $3.37 billion, with provisions for credit losses and total operating expenses as a percentage of revenues witnessing an unfavorable increase in the quarter. For the full year 2023, Citigroup’s top line grew 4% year-over-year to $78.5 billion, with a rise in services, personal banking, and other categories partly offset by declines in sales & trading, banking, and wealth management segments. The bank’s net income declined 38% year-over-year to $9.23 billion.
Looking ahead to the second quarter and beyond, Citigroup is expected to continue this trend, with revenues estimated to reach $80.7 billion in fiscal year 2024. The bank’s adjusted net income margin is likely to improve, leading to an annual GAAP EPS of $5.81. This, combined with a P/E multiple of just below 12x, is expected to result in a valuation of $67 per share for Citigroup. As the current macroeconomic environment remains uncertain with high oil prices and elevated interest rates, the question arises whether Citigroup will face a similar situation in the next 12 months as it did in the past 3 years and underperform the S&P 500, or if it will see a strong jump in performance.
It is important for investors to consider the performance of individual stocks against the broader market, as well as the track record of specific portfolios such as Trefis’ High Quality Portfolio, which has shown consistent outperformance over recent years. As Citigroup continues to navigate the challenges posed by the current financial landscape, the bank’s ability to adapt and improve its financial performance will be key in determining its future stock performance. With expectations of revenue growth and improved net income margins for fiscal year 2024, Citigroup’s stock may see a positive trajectory in the coming months, potentially leading to a valuation in line with Trefis’ estimate of $67 per share.
