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    C
    Earnings call· Mar 2025(Q1 FY25)

    CITIGROUP INC C

    Apr 15, 2025 Source

    Executive summary

    Citigroup Inc. Q1 FY25 — Strong Performance and Capital Returns Amidst Macro Uncertainty

    Citigroup delivered a strong Q1 FY25, showcasing continued momentum across all five businesses and achieving positive operating leverage. The firm demonstrated robust capital returns, exceeding buyback guidance, and maintained a strong balance sheet and liquidity position. Despite a more negative macroeconomic outlook and ongoing global uncertainty, management expressed confidence in its diversified strategy and disciplined execution to achieve its 2026 ROTCE targets, while actively managing expenses and capital.

    Highlights

    7

    • Reported net income of $4.1 billion and EPS of $1.96, with an ROTCE of 9.1%.

    • Expenses declined by 5% year-over-year, achieving positive operating leverage for the fourth consecutive quarter firm-wide.

    • Services recorded its highest first quarter revenue in a decade, with assets under custody and administration growing to $26 trillion.

    • Markets revenue increased by 12% year-over-year, driven by 8% growth in Fixed Income and 23% in Equities.

    • Banking revenue was up 12%, with M&A revenue nearly doubling, and Wealth revenue grew 24% with approximately 11% organic growth in client investment assets.

    • Returned $2.8 billion in capital to shareholders, including $1.75 billion in buybacks, exceeding prior guidance by $250 million.

    • Ended the quarter with a CET1 ratio of 13.4% and tangible book value per share crossing $90.

    Concerns

    4

    • Firm-wide net ACL build reflecting uncertainty and deterioration in the macroeconomic outlook, incorporating an 8-quarter weighted average unemployment rate of 5.1% (downside scenario 6.7%).

    • NCL rates increased sequentially in both card portfolios, consistent with historical seasonal patterns.

    • Retail Services revenue declined 11% primarily due to higher partner payment accruals related to late fees.

    • Mexican peso depreciation impacted Legacy franchises revenue, contributing to a 39% decline in All Other revenues.

    Guidance & targets

    6
    CategoryTargetConfidence
    Full year 2025 revenues
    $83.1 billion to $84.1 billion
    high materiality
    High
    Full year 2025 Net Interest Income (NII) ex-markets growth
    up approximately 2% to 3%
    high materiality
    High
    Full year 2025 expenses
    slightly lower than $53.4 billion
    high materiality
    High
    Full year 2026 ROTCE
    10% to 11%
    high materiality
    High
    Full year 2026 expenses
    less than $53 billion
    high materiality
    High
    CET1 ratio
    13.1%
    high materiality
    Medium

    Segment performance

    6
    SegmentRevenueYoYQoQMargin
    Services
    Driven by growth in TTS and higher deposit spreads. NIR declined due to absence of episodic fees, higher revenue share, and FX. Achieved positive operating leverage for the third consecutive quarter.
    NII: up 5%NIR: down 4%Expenses: declined 3%Average loans: increased 6%Average deposits: increased 2%Assets under custody and administration: $26 trillion
    		up 3%3%—Net income of $1.6 billion, ROTCE of 26.2%
    Markets
    Growth driven by increased client activity and monetization in Fixed Income (Rates & Currencies up 9%, Spread Products up 7%) and Equities (derivatives, prime services). Achieved positive operating leverage for the fourth consecutive quarter.
    Fixed Income revenues: increased 8%Equities revenues: increased 23%Expenses: increased 2%Cost of credit: $201 millionAverage loans: increased 7%Prime balances: up approximately 16%
    		up 12%12%—Net income of $1.8 billion, ROTCE of 14.3%
    Banking
    Strong growth in investment banking, particularly M&A, partially offset by declines in DCM and ECM. Corporate lending revenues declined despite increases in revenue share. Achieved positive operating leverage for the fifth consecutive quarter.
    Investment banking fees: increased 14%M&A: up 84%DCM: down 3%ECM: down 26%Corporate lending revenues (ex-mark-to-market): declined 1%Expenses: declined 12%Cost of credit: $214 million (ACL build of $180 million)
    		up 12%12%—Net income of $543 million, ROTCE of 10.7%
    Wealth
    Growth across Citi Gold, Private Bank, and Wealth at Work, driven by higher deposit spreads and investment fee revenues. Net new investment assets and market valuation contributed to client balance growth. Achieved positive operating leverage for the fourth consecutive quarter.
    NII: increased 30%NIR: increased 16%Client investment assets: grew 16%Net new investment assets: $16.5 billion (quarter), $56 billion (LTM)Organic growth in client investment assets: approximately 11%Expenses: roughly flatEnd-of-period client balances: increased 7%Average loans: declined 2%Average deposits: declined 2%
    		up 24%24%—Net income of $284 million, ROTCE of 9.4%, Pretax margin of 17%
    U.S. Personal Banking
    Revenue growth driven by branded cards and retail banking, offset by a decline in retail services due to higher partner payment accruals. Cost of credit included a net ACL release. Achieved positive operating leverage for the tenth consecutive quarter.
    Branded cards revenues: increased 9%Retail banking revenues: increased 17%Retail Services revenues: declined 11%Interest-earning balance growth (branded cards): 8%Spend growth (branded cards): 3%Expenses: roughly flatCost of credit: $1.8 billion (net ACL release of $172 million)Average deposits: declined 11%Cards reserve to funded loan ratio: 8.2% (from 7.9% last quarter)Card portfolios to consumers with FICO scores of 660 or higher: approximately 85%
    		up 2%2%—Net income of $745 million, ROTCE of 12.9%
    All Other
    Revenue decline driven by lower NII in Corporate/Other, mark-to-market valuation changes, Mexican peso depreciation, expiration of TSAs, and wind-down markets. Expense decline due to smaller FDIC special assessment, absence of restructuring charge, and reductions from exit markets.
    Expenses: declined 17%Cost of credit: $359 million (net credit losses of $256 million)
    		down 39%-39%——

    Operational metrics

    28
    Net Income
    $4.1 billion
    Q1 FY25
    Earnings Per Share (EPS)
    $1.96
    Q1 FY25
    Total Capital Returned to Shareholders
    $2.8 billionhighest quarterly amount since 2022
    Q1 FY25

    Includes $1.75 billion of buybacks, which was $250 million more than originally guided.

    Share Buybacks
    $1.75 billion$250 million more than guided
    Q1 FY25

    Part of the $20 billion share repurchase program.

    Tangible Book Value per Share
    $90
    Q1 FY25

    Crossed $90 during the quarter.

    Cost of Credit (Firm-wide)
    $2.7 billion
    Q1 FY25

    Primarily consisting of net credit losses in card as well as a firm-wide net ACL build.

    Net ACL Build (Firm-wide)
    net ACL build
    Q1 FY25

    Reflecting the uncertainty and deterioration in the macroeconomic outlook.

    ACL Build (Banking)
    $180 million
    Q1 FY25

    Driven by changes in the macroeconomic outlook and net credit losses.

    Net ACL Release (USPB)
    $172 million
    Q1 FY25

    Due to lower card balances largely in retail services, offsetting a build related to portfolio composition and macro outlook.

    Total Reserves
    $22.8 billion
    Q1 FY25
    Average Liquidity Coverage Ratio (LCR)
    117%
    Q1 FY25
    Available Liquidity Resources
    $960 billion
    Q1 FY25
    Card Transaction Processing Fees Presentation Change
    —
    Q1 FY25

    This change does not impact net income and prior periods have been aligned. Additional detail provided in appendix on Slide 22.

    Net Interest Income ex-Markets
    up 2%YoY
    Q1 FY25
    Noninterest Revenues ex-Markets
    down 6%YoY
    Q1 FY25
    Wealth Pretax Margin
    17%
    Q1 FY25
    Cost of Credit (All Other)
    $359 million
    Q1 FY25
    Client Investment Assets Growth (Wealth)
    16%
    Q1 FY25
    Organic Growth in Client Investment Assets (Wealth)
    approximately 11%
    LTM
    Net New Investment Assets (Wealth)
    $16.5 billion
    Q1 FY25
    Net New Investment Assets (Wealth)
    $56 billion
    LTM
    Branded Cards Interest-Earning Balance Growth
    8%
    Q1 FY25
    Branded Cards Spend Growth
    3%
    Q1 FY25
    Card Portfolio FICO Score Distribution
    85%
    Q1 FY25
    Unemployment Rate Assumption (CECL)
    5.1%
    8-quarter weighted average

    Incorporated into ACL framework, reflecting deterioration in macroeconomic outlook.

    Balance Sheet Total
    $2.6 trillionincreased 9% QoQ
    Q1 FY25

    Driven by growth in trading-related assets, typical for seasonal increase in market activity.

    90-day+ Delinquency Trend (Retail Services)
    starting to trend down
    Q1 FY25

    Important indicator for expected losses.

    AI Tool Adoption
    —
    Q1 FY25

    Designed to help teams resolve inquiries faster and improve client experience.

    Industry KPIs

    12
    MetricValueDetails
    Loansincreased 1%%
    Deposits$1.3 trillionUSD
    Rotce ROE9.1%%
    Cet1 ratio13.4%%
    Capital returns$2.8 billionUSD
    Fee income linesup 14%%
    Allowance reserves$22.8 billionUSD
    Net interest incomeup 2%%
    Net charge offs nplsincreased sequentially
    Total operating expenses$13.4 billionUSD
    Provision for credit losses$2.7 billionUSD
    Efficiency ratio operating leveragepositive operating leverage

    Product announcements

    1
    ProductTypeDetails
    Agent Assistlaunch

    Deals & partnerships

    3
    AltairAdvisory role in acquisition

    Advised Altair on the Siemens acquisition, highlighting Citi's leading role in significant transactions.

    Intra-Cellular Therapies (by J&J)Advisory role in transaction

    Advised on the recently announced Intra-Cellular transaction by J&J, showcasing continued strength in investment banking.

    PalantirNew relationship to improve client experience

    New relationship in Wealth management to improve client experience, part of broader investment in the business.

    Risks & headwinds

    5
    Macroeconomic uncertainty and deteriorationNear-term to medium-term

    Firm-wide net ACL build; 8-quarter weighted average unemployment rate of 5.1% (downside scenario 6.7%) incorporated into reserves.

    Mitigation: Diversified business model, strong balance sheet, capital, and liquidity; disciplined risk framework; well-reserved position.

    Prolonged uncertainty hurting confidenceOngoing

    Not quantified directly, but noted as a general impact on client behavior (pausing CapEx, stockpiling inventories).

    Mitigation: Focus on strategic execution, expense management, and capital returns; leveraging deep client relationships and global presence.

    Potential impact of Fed rate cuts on NIIFY25

    NII guidance assumes 2-3 cuts, now assuming a fourth, but back-loaded in the year, which does not significantly impact FY25 NII guidance.

    Mitigation: Active management of deposit repricing and beta; reinvestment from maturing securities into higher-yielding assets.

    Volatility and uncertainty around Stress Capital Buffer (SCB) resultsJune (SCB results)

    Not quantified, but noted as a risk to the pace of buybacks and achieving the 13.1% CET1 target by year-end.

    Mitigation: Commitment to $20B buyback program, willingness to accelerate pace as clarity emerges; strong earnings generation capacity.

    Mexican peso depreciationQ1 FY25

    Contributed to a 39% decline in All Other revenues, specifically impacting Legacy franchises.

    Mitigation: Part of managing wind-down markets and overall portfolio diversification.

    What to watch in Q2 FY25

    5

    Pace of share buybacks

    Next quarter (after SCB clarity)
    Current$1.75 billion in Q1 FY25
    TargetAcceleration beyond current pace

    Why it matters

    Significant impact on EPS accretion and capital return to shareholders, especially given the stock's trading relative to tangible book value.

    We have accelerated the pace of buybacks. And I think this quarter is a good example where I had guided for $1.500 billion and we kicked it up to $1.750 billion. And I think you should expect that as we see opportunities to continue to do that, then we're going to do it.

    Q&A highlights

    6

    How will Citi's Services and TTS businesses navigate and benefit from global trade reconfigurations and geopolitical shifts, given the potential for new tariffs and redrawing of economic lines?

    Jane Fraser emphasized Citi's diversified business mix, deep local presence, and expertise in facilitating cross-border trade, hedging, and financing. She stated that Citi's embeddedness with multinational clients makes it resilient to geopolitical dynamics and that the firm's ROTCE targets remain unchanged despite potential revenue mix shifts.

    “We are where the clients come, it's hedging for foreign exchange, interest rates, commodities, you see it for how they're looking at changing their financing around, and we tend to -- we are the ones that are helping them reconfigure the flows.”

    asked by Glenn Schorr · answered by Jane Fraser

    2 min read5 chapters

    Detailed Narrative

    01

    Strategic Execution and Business Momentum

    Citigroup reported strong Q1 FY25 results, demonstrating continued momentum across all five businesses: Services, Markets, Banking, Wealth, and U.S. Personal Banking. The firm achieved its third consecutive quarter of positive operating leverage for each business and its fourth consecutive quarter firm-wide. This performance is attributed to the consistent execution of its strategy, leading to improved returns and a 9.1% ROTCE for the quarter. Services recorded its highest Q1 revenue in a decade, while Markets and Banking saw significant revenue growth of 12% each, with M&A revenue nearly doubling.

    02

    Capital Management and Shareholder Returns

    The company remains committed to returning capital to shareholders, having returned $2.8 billion in Q1, including $1.75 billion in buybacks. This buyback amount exceeded prior guidance by $250 million and represents the highest quarterly amount since 2022. The CET1 ratio stood at 13.4%, and tangible book value per share crossed $90. Management aims to continue this pace of buybacks, targeting a 13.1% CET1 ratio by year-end, with the exact trajectory to be informed by the upcoming Stress Capital Buffer (SCB) results.

    03

    Macroeconomic Outlook and Risk Management

    Management acknowledged a more negative and uncertain macroeconomic outlook than anticipated at the start of the year, leading to a firm-wide net ACL build. This build reflects a deterioration in the macroeconomic outlook, incorporating an 8-quarter weighted average unemployment rate of 5.1%, with a downside scenario average of 6.7%. Despite these headwinds, Citi's diversified business model, strong balance sheet, plentiful liquidity, and robust reserves position it to navigate various economic environments from a position of strength, acting as a 'port in the storm' for clients.

    04

    Transformation and AI Integration

    Citi's transformation investments continue to modernize its infrastructure, simplify processes, and reduce manual touchpoints. The firm is integrating AI directly into business operations to enhance client experience, with the latest example being 'Agent Assist,' a generative AI tool for customer service in U.S. Personal Banking, currently being piloted in credit cards. These efforts are aimed at improving efficiency, control, and overall operational resilience, with many initiatives already impacting how the bank runs more effectively.

    05

    Banamex IPO and Commercial Banking Strategy

    Preparation for the Banamex IPO remains on track, with a focus on driving business performance and fulfilling regulatory requirements. While the goal is to IPO by year-end 2025, the timing may shift into 2026 depending on market conditions and regulatory approvals, always guided by maximizing shareholder value. In Commercial Banking, Citi aims to be the go-to bank for clients with cross-border needs, leveraging its unique global capabilities to support born-digital companies expanding internationally, particularly in high-growth regions like India, Australia, Japan, and Europe.

    AI-generated summary of the company’s earnings call. Not investment advice.