Citigroup (NYSE: C) is scheduled to report its fiscal Q3 2023 results on Friday, October 13, 2023. We expect Citigroup to beat the consensus estimates for revenues and earnings. The bank posted better-than-expected results in the last quarter, despite a marginal decrease in the total revenues to $19.44 billion. It reported a 16% y-o-y growth in the net interest income (NII), more than offset by a 28% decrease in the noninterest revenues. While the NII was up due to higher outstanding loan balances and improvement in the interest rates, the noninterest income suffered due to a drop in investment banking fees and lower principal transactions income. We expect the same trend to continue in the third quarter. Our interactive dashboard analysis on Citigroup’s Earnings Preview has more details.
Our forecast indicates that Citigroup’s valuation is $56 per share, which is 36% above the current market price of around $41. Interestingly, Citigroup stock had a Sharpe Ratio of almost zero since early 2017, which is lower than 0.6 for the S&P 500 Index over the same period. This compares with the Sharpe of 1.23 for the Trefis Reinforced Value portfolio. Sharpe is a measure of return per unit of risk, and high-performance portfolios can provide the best of both worlds.
(1) Revenues to edge past the consensus
Citigroup revenues grew 5% y-o-y to $40.9 billion in the first two quarters of 2023.
- The NII increased 19% y-o-y over the first half, mainly due to higher interest rates and loan growth. We expect the same momentum to continue in Q3.
- The noninterest revenues were down 15% y-o-y over the same period. It was primarily due to lower investment banking and principal transaction income. We expect it to follow the same trend in the third quarter.
- Overall, Citigroup’s revenues are likely to touch $79.1 billion in FY2023.
Trefis estimates Citigroup’s fiscal Q3 2023 revenues to be around $19.38 billion, slightly above the $19.27 billion consensus estimate.
2) EPS to top the expectations
Citigroup Q3 2023 adjusted earnings per share (EPS) is expected to be $1.22 per Trefis analysis, almost 3% above the consensus estimate of $1.19. The adjusted net income decreased 15% y-o-y to $7.5 billion in the first half of 2023. It was partly due to higher expenses as a % of revenues and partly because of an unfavorable build-up in the provisions for credit losses. Notably, the provisions figure rose by 87% y-o-y to $3.8 billion. We expect the third quarter results to be on similar lines. Overall, Citigroup is likely to report an annual GAAP EPS of $5.92 in 2023.
(3) The stock price estimate is 36% above the current market price
We arrive at Citigroup’s valuation, using an EPS estimate of around $5.92 and a P/E multiple of just above 9x in fiscal 2023. This translates into a price of $56, which is 36% more than the current market price.
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
|S&P 500 Return||1%||13%||94%|
|Trefis Reinforced Value Portfolio||0%||23%||529%|
 Month-to-date and year-to-date as of 10/10/2023
 Cumulative total returns since the end of 2016