Citigroup’s stock (NYSE: C) has lost 20% YTD, as compared to the 16% decline in the S&P500 over the same period. Further, the stock is currently trading at $48 per share, which is 20% below its fair value of $61 – Trefis’ estimate for Citigroup’s valuation. The bank surpassed the consensus estimates in the third quarter of 2022, with revenues increasing by 6% y-o-y to $18.5 billion. It was driven by a 66% jump in the legacy franchise revenues, which was primarily due to the gain on sale of the Philippines consumer business in Q3 2022 and the loss on sale of the Australia consumer business in the year-ago period. Further, the personal banking & wealth management division posted a 6% growth driven by improvement in net interest income, partially offset by lower non-interest revenue. On the flip side, the institutional client group witnessed a 5% y-o-y drop in revenues mainly because of a 64% decrease in investment banking and a 7% decline in sales & trading businesses. In addition to this, the provisions for credit losses increased from -$192 million to $1.37 billion. It led to a 25% y-o-y reduction in net income to $3.5 billion.
The bank’s top line grew 4% y-o-y to $57.33 billion in the first nine months of 2022. It was driven by a 4% growth in the institutional client group, a 3% rise in personal & wealth management, and a 6% increase in legacy franchise segments. On the cost front, the noninterest expenses as a % of revenues and provisions for credit losses saw an unfavorable increase over the same period. Overall, the net income decreased 34% y-o-y to $12.33 billion.
Moving forward, we expect the investment banking and sales & trading businesses to struggle in Q4, too. However, net interest income is likely to post growth. Altogether we estimate Citigroup revenues to touch $75.2 billion in FY2022. Additionally, C’s adjusted net income margin is likely to decrease from 29% to around 19%, leading to an adjusted net income of $14.1 billion and an annual EPS of $7.12. This coupled with a P/E multiple of just below 9x will lead to a valuation of $61.
|S&P 500 Return||4%||-16%||80%|
|Trefis Multi-Strategy Portfolio||4%||-19%||221%|
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 Month-to-date and year-to-date as of 11/24/2022
 Cumulative total returns since the end of 2016