Citigroup (NYSE: C) stock has gained 18% year-to-date, compared to the S&P500’s 14% rise over the same period. Notably, Citigroup rival Goldman Sachs (NYSE: GS) has gained 29% year-to-date. Overall, Citi stock is currently trading at $61 per share, 15% below its fair value of $71 – Trefis’ estimate for Citigroup Rating.

Given the current financial backdrop, C stock has barely changed. It has risen from $60 in early January 2021 to around $60 now, while the S&P 500 has risen by about 45% over that roughly 3-year period. Notably, C stock has lagged the broader market over the past 3 years. The stock’s returns were -2% in 2021, -25% in 2022, and 14% in 2023. In comparison, the S&P 500’s returns were 27% in 2021, -19% in 2022, and 24% in 2023 – suggesting that C lagged behind the S&P in 2021, 2022 and 2023. consistently beats the S&P 500 – in good times and bad – has been difficult for individual stocks in recent years; for heavyweights in the financial sector such as JPM, V and MA and even for megacap stars GOOG, TSLA and MSFT. In contrast, the Trefis High Quality Portfolio with a collection of 30 stocks outperformed the S&P 500 every year in the same period. Why is that? As a group, the HQ portfolio stocks delivered better returns with less risk compared to the benchmark index; less of a rollercoaster ride as shown by the HQ portfolio performance metrics. Given the current uncertain macroeconomic environment with high oil prices and elevated interest rates, could C experience a similar situation as in 2021, 2022 and 2023 and perform worse than the S&P in the next 12 months – or will there be a sharp jump?

The bank beat consensus estimates in the second quarter of fiscal 2024. It reported total revenues of $20.14 billion – up 4% year-over-year, driven by 6% growth in sales and trading, 3% in services, 6% in retail banking, and 38% in investment banking. However, revenues were somewhat offset by a 22% year-over-year decline in all other revenues. Overall, growth was primarily driven by a 20% increase in noninterest income, partially offset by a 3% decrease in net interest income due to lower net interest income. On the expense side, provisions for loan losses saw an unfavorable increase in the quarter (+36% year-over-year), offset by a 2% decrease in operating expenses. This resulted in net income of $3.2 billion – up 10% year-over-year.

The bank’s revenue improved marginally to $41.2 billion in the first six months of fiscal 2024, driven by a 4% growth in noninterest income, partially offset by a 1% decline in NII. Notably, the company generates around 65% of its revenue from NII. On the cost side, provisions increased 27% year-on-year to $4.84 billion during the same period, followed by a 3% increase in operating expenses. Overall, net profit declined 12% year-on-year to $6.59 billion.

We expect similar results for the third quarter. Overall, we expect Citigroup’s revenues reach $80.98 billion in fiscal 2024. In addition, C’s adjusted net income in the year will likely be around $11 billion, resulting in annual GAAP EPS of $5.82. Combined with a P/E ratio of just over 12, this results in a valuation of $71.

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