This is the new thread to discuss Citibank. Bank of America raised the price target to $90 and Citi to $95.
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Removed one of the overhangs… This story has no further details, but assume AAL has extracted some additional concessions (or cost to Citi).
Why Citi… in one line/ image…
From today’s stock price, by end of of 2027, the stock price reaches 120, that will be 18.56% CAGR not including dividends. The dividends will be additional 3%.
The assumptions are 2~3% revenue growth, 1% in net interest income, 1% expense growth.
The tailwinds are:
- Regulatory relief
- Benefits of reorganization
- Some segments are just getting back to below peer average level of performance
In other words the assumption bakes no significant outperformance, just business as usual, and the stock closing the discount to the TBV. For comparison, JPM trades at 2.5 x TBV. I have been talking about Citi is cheap and should catch up to the Book value theme for now couple of years. The argument may seem bit stale. But, give me credit for not changing my argument and hoping the results will change, 
Citi CFO today in the Goldman Sachs conference, re-iterated 2024 guidance, confirmed so far they have bought back $500 M shares, and committed to $1 B buyback for the quarter. Investment banking is doing better than forecast and credit costs (credit card losses) are in-line. Overall positive tone.
Capital market M&A is 30 year low compared to GDP, and 2025 is expected to bounce back strong. This is going to be a big plus for Citi and few other big banks like (GS).
Citi and WFC will announce 4Q results on 1/15, Wed. Looking forward to 2025 guidance. I am expecting both WFC, C will issue bullish guidance. Specifically for Citi, the earnings inflection for the next 3 years starts now… Already the price has moved up. But, the tailwinds all are aligning…
One of my longterm thesis on Citi is, given the significant discount to BV, TBV, buybacks are very accreditive. My expectation was all along Citi will aggressively buyback. Now, due to various regulatory and other reasons Citi was not very aggressive last year. However, one of the ways they can get to 11% ROTCE is through buybacks. Since they are carrying excess capital ($17 B) and additional capital will be released through Mexico IPO and other market exits, they can return 100% of their earnings to the shareholders in the form of Dividends and buybacks.
Currently the dividends are $2.24 per year. If they return 100% of their earnings, that means Citi can do $10 B, $14 B, $ 17 B, on 25/26/17. On a $135 market cap, they can reduce significant # of shares.
Short of a recession, under various scenarios Citi can execute significant buybacks.
The earnings season starts in earnest tomorrow with big banks kicking off. Tomorrow JPM/ WFC/ C, earnings call at 8:30/ 10:00/ 11:00 EST.
2025 guidance will be coming. Just for awareness, JPM in a research note said in 2025 $185 B will be spend by banks on buyback.
Will 2025 be the year where Citi share price catches up to the TBV?
Citi announced a new buyback program for $20 B!!!
Post 4Q 2024 thoughts.
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The stock price has moved up a lot and the implied volatility has gone down. So, the usual put selling is not that profitable, so is call spreads. 
Solid quarter, revenues, NII ($400 M over guidance), profit all beat. All divisions (LOB) outperformed, more importantly, the guidance is all LOB’s will show growth for 2025. Citi being a global bank, ideally positioned to drive higher fee income from advisory and M&A.
Citi bought back $1.75 B of shares, $250 M more than $1.5 B guidance. Expect this rate to be higher next quarter and 2H. Citi is planning to bring down its CET1 ratio to 13.1 from 13.3 and use the capital released for buyback.
For now, business is growing nice, profits are growing, expenses are coming down, share buybacks are accelerating. I listened to the earnings call live, but will wait for the transcripts to do my review.
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Lots of things are aligning for Citi,
- The NII is set to increase
- M&A/ trading/ IB revenues to raise
- TTS revenues have the tailwind of tariff disruptions
- The expenses are set to decline or at least stable in $$ terms so the efficiency rate gets better
- Consumer is doing good so credit card delinquency is within the guide, so charge-offs’ while will be slightly higher in the coming quarter will be good overall for the year
- Last but not least, going to get some regulatory relief that will release additional capital for buyback
- So the stock price is reacting to it by going up steadily
- Citi will end up buying stock that is expensive compared to where the stock traded for the last few years; But there is $20 B backstop in terms of buyback on $152 B market cap
The below chart shows some support points. Thinking of couple of trades
- A covered call Jan 26 $65 Call, for a net price of $62.7, including dividends will give you 9.6%, with downside protection of 23%
- A call spread of Jan 26 buy $55 and sell $65, for net price of $8.8, will give 24% annualized return
Already they are up 25%