Citigroup (C) Projects Revenue & Expense Growth for 2022

Yesterday, at its investor day, Citigroup Inc. C outlined its mid-term strategy that underlined streamlining of operations to improve banking mix, investment in technology to modernize the operations and boosting the company’s global presence.

Importantly, the bank aims to boost its return on average tangible common shareholder equity, driven by medium-term revenue growth and improved business mix. It is targeting a return on average tangible common shareholder equity (RoTCE) of 11-12% over the next three to five years.

For the first quarter of 2022, C expects a mid-single-digit decline in total revenues, excluding divestiture impacts. The bank expects to see a 10% year-over-year decline in its Markets segment revenues in the first quarter. For 2022, it is projecting low-single-digit growth in total revenues, excluding divestitures.This is driven by higher interest rates, modest loan and deposit growth, higher fees, and flat Market revenues.

In the medium term, revenues are expected to grow at a compounded annual growth rate (CAGR) of 4-5%. This is expected to be backed by high-single-digit CAGR revenue growth in segments like Treasury and Trade Solutions, Securities Services, and U.S. Personal Banking. High-single-digit to low-teens growth is expected in the Global Wealth Management segment. In contrast, the Banking and Markets segments are targeted to grow in the low-single-digit and mid-single-digit ranges, respectively.

Its first-quarter expense growth is expected to increase 10-12%, excluding 2022 divesture impacts. With this, 2022 expenses are projected to grow 5-6%, excluding similar impacts. Primarily, transformations and business-led investments are expected to escalate costs. Expenses for 2022 are projected to grow 7%-8%, excluding 2021 divestiture costs of $1.2 billion.

C is also expecting to increase "investment in transformation" spend to $3-$3.5 billion in 2022 from $1.7 billion in 2021. The investments relate to consent orders and technology upgrades, among others.

In the near term, the cost of credit is expected to begin normalizing.

On the capital front, the company expects to achieve a CET1 ratio of 12% in the near term. In first-quarter 2022, the same is projected to be 11.7%, assuming dividend distributions of $1 billion.

The company also reaffirmed its strategy to exit 14 consumer businesses in Asia, EMEA and Mexico, and shift focus on higher-growth areas of US consumer, Asia wealth management and consumer payments. The actions will likely aid the company in achieving its ROTCE. Also, the efforts will simplify the firm and help focus on its core businesses.

Shares of the bank lost 16.3% over the last six months, underperforming 0.7% decline for the industry.

Image Source: Zacks Investment Research

C currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Stocks to Consider

Some better-ranked stocks in the banking space are First Business Financial Services FBIZ, Bancolombia S.A. CIB and PCB Bancorp PCB. At present, CIB flaunts a Zacks Rank of 1, while FBIZ and PCB carry a Zacks Rank #2 (Buy) each.

Over the past year, shares of First Business have jumped 35.8%, while shares of CIB and PCB have rallied 13.6% and 55%, respectively.

Over the past 30 days, the Zacks Consensus Estimate for First Business’ current-year earnings has been revised 7.4% upward, while the same for CIB has moved 14.8% north. Moreover, current-year earnings estimates for PCB Bancorp have moved 14.4% up over the past month.

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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.