Citigroup Will Have To Bank On Its Card Business To Ensure Revenue Growth Over Coming Years

by Trefis Team
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Citigroup (NYSE:C) is a leading global financial services holding company which does business in over 160 countries. It provides consumer banking, credit cards, investment banking, sales & trading, and treasury & securities services to retail consumers, small businesses, corporates, governments, high net-worth Individuals, and Institutional Investors (like pension funds, mutual funds and hedge funds etc). Citigroup faces stiff challenges and competition from offerings by its competitors like JPMorgan, Goldman Sachs, Morgan Stanley, Bank of America, and Capital One (credit cards).

Trefis details the key components of Citigroup’s Revenues in an interactive dashboard, along with our forecast for the next three years. In 2019, Citigroup’s Institutional Client Group and Global Consumer Banking divisions are expected to contribute roughly $36.7 billion (50%) and $35.2 billion (48%) respectively to its Total Revenue estimate of $73.9 billion. You can make changes to our forecast for individual revenue streams in the dashboard to arrive at your own forecast for Citigroup’s Revenues. Additionally, you can see more Trefis data for financial companies here.

What to expect from Citigroup’s Revenues?

  • Total revenues have increased at an average annual rate of 2% over the last three years, from $69.9 billion in 2016 to $72.9 billion in 2018, and the trend is expected to continue over coming years.
  • Citigroup’s revenues are expected to increase from $72.9 billion in 2018 to $77.2 billion by 2021, mainly driven by growth in Global Consumer Banking division.

[A] Global Consumer Banking is expected to cross $37 billion by 2021, mainly driven by growth in Citi Cards.

  • This segment includes Consumer Banking (traditional banking services like deposits, loans etc) and Citi Cards (Citi-branded credit and debit cards).
  • It has contributed more than 45% of total revenues over the last three years. It has grown 6% from $31.8 billion in 2016 to $33.8 billion in 2018.
  • Further, we expect the segment to grow at an average annual rate of 3% and cross $37 billion by 2021. This would be mainly driven by growth in outstanding card loans.
    • Revenue for the Citi Cards division is expected to grow 10% from $19.7 billion in 2018 to $21.7 billion in 2021, mainly driven by net interest income from outstanding card loans.
    • Revenue for consumer banking would grow by 9% from $14.1 billion in 2018 to $15.3 billion in 2021. This increase would be driven by 12% growth in net interest income from total consumer banking loans.

[B] Institutional Client Group revenue would slightly drop in 2019.

This segment could be divided in three subdivisions:

  • Sales & Trading – deals in sales, trading and structuring of financial market products like bonds, equities, derivative etc.,
  • Advisory & Underwriting – provides financial advisory and capital raising services in debt and equity capital markets,
  • Treasury & Trade Solutions – delivers commercial banking products and services like Cash Management, Trade Finance, Securities and Fund Services (SFS).

A detailed analysis of revenues for the various components of Citigroup’s Institutional Client Group segment is available in our interactive dashboard for Citigroup.

[C] Corporate/Other segment doesn’t have a significant impact on Citigroup’s revenues

  • This segment primarily represents the Citigroup Corporate operations, which provide a support function to the bank’s other operating divisions.
  • We expect the segment revenues to decrease from $2.1 billion in 2018 to $1.8 billion by 2021.

Trefis estimates Citigroup’s stock (shows cash and valuation analysis) to have a fair value of $82, which is roughly 15% higher than the current market price.

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