Citigroup C shares rebounded from Wednesday’s lows after reporting third-quarter results. Bank results marked the start of the earnings season.
Citigroup on Tuesday reported third-quarter fiscal 2024 revenue rose 1% to $20.32 billion, beating analysts’ estimates of $19.84 billion.
Excluding divestiture-related impacts, revenue increased 3%.
Also read: Nuclear stocks soar as Amazon becomes the latest tech giant to invest in nuclear power
Net income was $3.24 billion, a decrease of 9%, primarily reflecting a decline in U.S. Personal Banking (USPB).
B of A Securities analyst Ebrahim Poonawalla maintained Citigroup with a Buy rating and raised his price target to $78 from $77. Oppenheimer analyst Chris Kotofsky reiterated his opinion of Citigroup as an outperformer and lowered his price target to $91 from $92. Goldman Sachs analyst Richard Lumsden called Citigroup a “buy” and maintained his price target of 1% higher at $72.
B of A Securities: Strong performance driven by better-than-expected fee income, with non-interest income (NIR) up 13% and equity trading and services income up 32% and 8% YoY I did. Poonawalla pointed out.
However, net interest income (NII) was lower than expected and the outlook for the fourth quarter suggests flat growth, indicating potential downside compared to expectations prior to the third quarter.
He added that fourth-quarter expenses are expected to be $13.4 billion, slightly above the consensus estimate of $13.2 billion.
Poonawalla said on the earnings call that concerns about possible asset caps imposed by regulators surfaced as management initially struggled to address the issue.
Chief executive Jane Fraser later clarified there would be no asset cap, but initial uncertainty prompted further selling. Despite these concerns, Citigroup’s decision to resume share buybacks in the third quarter after suspending them in the second quarter due to regulatory negotiations provided investors with some reassurance. said the analyst.
But optimism has been tempered by limits on management’s ability to predict the pace of share buybacks.
Looking ahead, Poonawalla said analysts have raised Citigroup’s fourth-quarter and full-year 2025 EPS estimates as they expect continued NIR growth, partially offset by higher expenses. He pointed out.
The analyst said Citigroup remains an attractive investment, with shares trading at 9.1 times estimated 2025 EPS and 0.7 times tangible book value (TBV).
He added that the company’s ongoing transformation, including improved service and asset management efficiencies, will help drive a reassessment of TBV over the coming year.
Poonawalla said NII faces near-term challenges, but continued strength in fee income, particularly in services, markets and banking, is likely to help Citigroup weather interest rate headwinds. said.
Oppenheimer: Chris Kotofsky highlights that Citi is one of the most undervalued banks he covers, trading at just 0.7 times tangible book value.
His $91 price target is consistent with his expectations for Citi and is based on a price-to-earnings ratio of 70% compared to the S&P 500 equal-weight consensus estimate. Mr. Kotowski views this as the lower end of the 70% to 80% range, which he believes is fair value for the bank.
In Citi’s Q&A, the analyst said credit card losses near the high end of expected ranges, speculation about a possible undisclosed asset cap, uncertainty over whether Banamex’s IPO will take place in 2025, It said the main concerns centered around cost-cutting plans. This will increase from $53.8 billion this year to $51 billion to $53 billion by 2026.
Kotowski expected fiscal 2024 revenue to be $81.01 billion and EPS to be $5.95.
Goldman Sachs: Ramsden said Tuesday’s drop in stock offers a buying opportunity as the company maintains its full-year outlook, and the results reflect strong momentum in the market and wealth business and credit indicators in the cards business. He said he highlighted some positive trends in terms of improvements.
Management reiterated its strategic priorities focused on strengthening risk and controls to meet regulatory requirements, continued focus on expense discipline, and growing market share across multiple businesses.
Management also expects regulators to refrain from imposing asset caps in the near future. While there is some uncertainty about the path to revenue growth through 2025, the analyst notes that his model assumes only 3% revenue growth through 2025, and that the momentum in the fee business and peer It noted that this was manageable given its low asset sensitivity compared to other companies.
Lumsden raised his 2024 EPS forecast by 1%. The analyst’s 2025 P/E multiple target of 9.5x remains unchanged, resulting in his 12-month price target of $72, an increase of 1%.
Lumsden expects fiscal 2024 sales of $80.91 billion (previously $80.72 billion) and EPS of $5.81 (previously $5.74).
KeyBanc: Analyst Alex Markgraf reviews third-quarter reports from Bank of America Corp. BAC, Citigroup, JPMorgan Chase & Co. JPM, and Wells Fargo & Co. WFC In response, we conducted a detailed investigation into reported credit and debit card usage data.
Bank of America, Citigroup, JPMorgan and Wells Fargo combined for third-quarter credit card transaction volume up 5% compared to 6% in the second quarter a year ago, with debit card transaction volume increasing increased by 4% compared to the same period last year. The second quarter was 5% compared to the previous year.
The bank noted that spending growth has slowed, but stressed that consumer behavior remains stable and consumers remain resilient. JPMorgan noted that consumers had nearly exhausted their “cash buffer,” and Bank of America reported that consumer payments growth in the third quarter continued into October.
This gradual deceleration in card issuance growth is in contrast to consensus expectations for third-quarter earnings for Mastercard MA and Visa V, where credit and debit card issuance is expected to accelerate. Despite this discrepancy, Markgraf sees minimal risk to third-quarter earnings.
Price Action: C shares rose 2.35% to $64.08 at last check on Wednesday.
Also read:
Image via Shutterstock
© 2024 Benzinga.com. Benzinga does not provide investment advice. Unauthorized reproduction is prohibited.
