EUR 850.00 For Business Accounts Only

Morningstar | Citi on Track to Meet Targets; Maintaining Our FVE

Narrow-moat-rated Citigroup reported solid third-quarter results, with net income of $4.6 billion, or $1.73 per share, on $18.4 billion of revenue. Revenue and income numbers were largely in line with last quarter, with share repurchases helping earnings per share to grow at an accelerated rate. The bank has repurchased roughly 8% of average shares over the last year. Citigroup's efforts to increase profitability continue to show results, with a return on tangible common equity of 11.3% for the quarter and 11.2% year to date. This will exceed management’s goal of 10.5%. The bank is well positioned to reduce its capital over time, pending regulatory permission, and the common equity Tier 1 ratio fell during the quarter to 11.8% from 12.1% last quarter. Despite only marginal revenue growth, expenses have remained flat year to date, allowing the bank’s efficiency ratio and overall profitability to improve. This is all largely in line with what we expected, and we are maintaining our $78 fair value estimate.

End-of-period loan balances were up by 1% compared with the second quarter. Much of this growth came from Citi’s Latin America business, as both consumer and corporate loans were up 5% in the region. Mortgage headwinds continued for the bank as they have for the industry. Credit costs remained range-bound, with the loan-loss provision remaining below $2 billion for the quarter. Management was largely positive on its expectations for the fourth quarter, expecting equity and fixed-income revenue to be up year over year and investment banking revenue to be the same. The bank also remains constructive on continued growth from both Asia and Mexico. Overall, Citi is well on its way to meeting its improved financial targets.