Citi Rolls Back Key Target Halfway Through Fraser’s Revamp

(Bloomberg) — Citigroup Inc. lowered a crucial profitability target central to Chief Executive Officer Jane Fraser’s plan to turn around the bank, but offered investors a sweetener in the form of share buybacks.

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In a sign that it’s struggling to contain costs, the lender now expects return on tangible common equity to be between 10% and 11% by the end of next year, according to a statement. It had previously forecast the metric would be between 11% and 12% by that time.

Citigroup’s move confirms what analysts have warned: that the lender may find it hard to keep a lid on expenses while it implements a plan to overhaul operations around the world and strengthen internal controls that have frustrated regulators.

The bank said that for 2025, costs will be only slightly lower than the $53.8 billion it spent in 2024 as it makes continued investments in its businesses.

Still, Fraser has sought to improve what the bank is giving its investors. She announced on Wednesday that the company’s board of directors has authorized a program that will let Citigroup repurchase $20 billion worth of stock in the coming years — unleashing billions of excess capital the bank had been keeping on hand to meet a key ask from shareholders.

Shares rose 5.1% to $73.25 at 8:38 a.m. in early New York trading. The company’s stock had already advanced 40% in the last year, outpacing the 28% gain in the S&P 500 Financials Index.

The CEO told investors in early 2022 that she would need five years to execute her turnaround of Citigroup, the only major US bank worth less than it was a half-decade ago. The bank’s return on tangible common equity in 2024 was 7%. That compares with the 22% that rival JPMorgan Chase & Co. reported on Wednesday.

“This level is a waypoint, not a destination,” Fraser said in the statement, referring to her revised target. “We intend to improve returns well above that level and deliver Citi’s full potential for our shareholders.”

The bank’s revised target clouded stronger-than-expected results for the fourth quarter. Citigroup also hit revenue and expense guidance for 2024 that it laid out a year ago and it said it now expects revenue for 2025 to rise to $83.5 billion to $84.5 billion.

Revenue rose across all five of its main business lines in the quarter. Net income was $2.9 billion, or $1.34 a share, beating the $1.22 average estimate of analysts tracked by Bloomberg.

Revenue from fixed income trading soared 37% to $3.5 billion, trouncing the $2.94 billion average of analyst estimates. Equities trading revenue also climbed 34% to $1.1 billion.

While corporate lending and debt underwriting revenues were lower than expected, the firm’s investment bankers and equity underwriters topped predictions.

(Updates with additional context, shares and guidance beginning in first paragraph.)