Citi cuts return targets to spend more on regulatory fixes, plans $20bn buyout By Reuters

By Tatiana Bautzer and Manya Saini

(Reuters) – Citigroup cut its closely watched 2026 profitability target as it grapples with rising regulatory costs and, at the same time, announced a $20 billion share buyback program.

Citigroup (NYSE: ) beat estimates for fourth-quarter profit, driven by strong trading and dealmaking, sending shares of the third-largest U.S. lender up 7.4% in afternoon trading on Wednesday.

“2024 was a critical year and our results show that our strategy is delivering on expectations and driving better performance in our businesses,” Citi chief executive Jane Fraser said in a statement.

However, the bank lowered its target return on tangible common equity (ROTCE) for next year to a range of 10% to 11% from 11% to 12%. Fraser described the new target as “a waypoint, not a destination”.

The bank is investing more in addressing compliance issues, Chief Financial Officer Mark Mason told reporters, referring to regulatory fines for risk management and data management.

“We saw a need for greater investment in data transformation, technology, in improving the quality of information that comes out of our regulatory reporting,” he said.

In 2020, the Office of the Comptroller of the Currency and the Federal Reserve fined Citi $400 million for certain risks and data failures. Last year in July, regulators fined Citi $136 million for not making enough progress to address those issues.

Citi’s board of directors approved a $20 billion share buyback program, authorizing management to buy back up to $1.5 billion during the first quarter of 2025. The bank did not provide a timeline for additional purchases. The size of the buyback program is a “show of strength” for the bank, Piper Sander analyst Scott Siefers said in a note to clients.

TRADING, INVESTMENT BANKING

Citi reported net income of $2.9 billion, or $1.34 per share, for the three months ended Dec. 31, compared with a loss of $1.8 billion a year earlier. In total (EPA:) revenues rose to $19.6 billion, compared to $17.4 billion a year earlier.

On an adjusted basis, Citi reported earnings of $1.34 per share in the fourth quarter, compared with the average analyst estimate of $1.22, according to data compiled by LSEG.

Trading desks benefited from a sharp rise in US stocks, with record highs in the fourth quarter. Market revenue at Citi jumped 36% to $4.6 billion in the quarter, with fixed income and equity markets revenue up 37% and 34%, respectively.

Wall Street dealmakers also cashed in on a resurgence in mergers, acquisitions and initial public offerings after a nearly three-year dry spell. Capital market activity received a boost in the second half of 2024 as corporate clients issued more debt and equity. Citi’s investment banking revenue rose 35% to $925 million in the fourth quarter.

Global investment banking revenue will jump 26% in 2024 to $86.8 billion, according to Dealogic. Citi earned the fifth highest fees among banks during the same period.

Mason said corporate clients are active and he expects an increase in deals.

“The global mood is mostly positive,” he said, adding that clients are optimistic despite the uncertainty of the policies of the next US presidential administration. Total banking revenues were $1.2 billion, up 27% year over year.

Citi shares rose 37% in 2024, outperforming the broader banking index and stock markets, as investors applauded Chief Executive Jane Fraser’s efforts to transform the bank.

At the end of 2023, Fraser laid out a plan to increase profits, streamline operations and fix long-standing deficiencies in the bank’s risk management and data, and much of the reorganization was implemented over the past year.

The bank said it still expects to list its Mexican unit Banamex on the Mexican and U.S. stock exchanges this year, but regulatory approvals and market conditions may delay the transaction until 2026, Fraser told analysts. In December, the bank concluded the separation of banking companies necessary for listing.

Revenue at Citi’s asset management division, a key part of Fraser’s growth strategy, climbed 20% to $2 billion.