Citigroup (NYSE: C) is scheduled to report its fiscal Q4 2021 results on Friday, January 14, 2022. We expect Citigroup to top the consensus estimates for revenues, while the earnings are likely to miss the expected figure. The bank posted better than expected results in the last quarter, driven by growth in the investment banking and equity trading businesses. That said, the total revenues were still marginally below the year-ago period. This was due to a 13% y-o-y drop in the Global Consumer Banking (GCB) segment, which suffered due to a drop in outstanding loans and lower deposit spread. We expect the revenues to see some growth in the fourth quarter of 2021, with investment banking and equity trading driving the results, followed by some improvement in the GCB business.
Our forecast indicates that Citigroup’s valuation is $84 per share, which is 28% above the current market price of around $66. Our interactive dashboard analysis on Citigroup’s Earnings Preview has more details.
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(1) Revenues expected to be slightly ahead of the consensus estimates
Citigroup’s revenues for full-year 2020 were $74.3 billion – at the same level as the 2019 figure, mainly driven by lower GCB revenues, offset by growth in sales & trading, and investment banking revenues.
- The company witnessed a 9% y-o-y drop in the GCB segment to around $30 billion in 2020 due to interest rate headwinds, a drop in new loan issuance rate, and lower consumer activity levels. The unit contributes close to 44% of the total revenues, which decreased to 40% in 2020. The difficult phase continued in the first three quarters of 2021, and the cumulative nine months revenues declined 11% y-o-y. Notably, the firm has announced it will exit 13 international consumer banking markets, which are less profitable for the company. That said, we expect the segment to post some growth in the fourth quarter, driven by a continuous recovery in the economy.
- The Institutional Clients Group (ICG) segment – which includes sales & trading, investment banking, and securities services, grew 12% y-o-y in 2020. While the investment banking and equity trading businesses have seen strong growth in the first three quarters of 2021, FICC (fixed income, currency, & commodity) trading revenues have suffered. It resulted in a 5% y-o-y drop in the cumulative nine months revenues of 2021 to $33.4 billion. We expect the same trend to continue in the fourth quarter as well.
- Overall, we expect Citigroup’s revenues to remain around $71.4 billion for the full-year FY2021.
Trefis estimates Citigroup’s fiscal Q4 2021 revenues to be around $17.41 billion, 3% above the $16.85 billion consensus estimate. We expect the growth in investment banking, equity trading, and some improvement in consumer banking revenues to drive the fourth-quarter results.
The Fed is expected to increase interest rates in 2022. Citigroup’s net interest income is likely to benefit from this move. Further, investment banking and equity trading businesses are likely to continue their momentum for some more months. Our dashboard on Citigroup’s revenues offers more details on the company’s operating segments along with our forecast for the next two years.
2) EPS is likely to miss the consensus estimates
Citigroup Q4 2021 adjusted earnings per share (EPS) is expected to be $1.30 per Trefis analysis, almost 7% below the consensus estimate of $1.40. While the profitability numbers suffered in 2020 due to a build-up in provisions for credit losses, they significantly improved in 2021 led by a favorable decrease in the provisions. Notably, the bank’s cumulative first nine months’ EPS improved from $2.82 to $8.70. We expect the fourth-quarter EPS to remain below the year-ago figure, as the provisions figure is unlikely to see a major decrease in Q4. In addition, it stopped the share repurchase program in the quarter, which is likely to reduce the shareholder returns further. Overall, Citigroup is likely to report an adjusted net income of $19.1 billion and annual EPS of $9.98 for full-year 2021.
(3) Stock price estimate 28% above the current market price
We arrive at Citigroup’s valuation, using an EPS estimate of around $9.98 and a P/E multiple of just above 8x in fiscal 2021. This translates into a price of $84, which is 28% higher than the current market price of close to $66.
Note: P/E Multiples are based on Share Price at the end of the year and reported (or expected) Adjusted Earnings for the full year
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|S&P 500 Return||-2%||-2%||109%|
|Trefis MS Portfolio Return||-6%||-6%||271%|
 Month-to-date and year-to-date as of 1/10/2022
 Cumulative total returns since the end of 2016