Citigroup (NYSE:C)'s Q3 2023 financial performance exceeded market predictions, with a net income of $3.5 billion, marking a 22% increase compared to the previous quarter and a 2% rise year-over-year. This substantial growth is primarily attributed to a 9% revenue surge in the institutional clients business, which boosted total revenues to $20.1 billion. The robust performance in Services and Markets within the Institutional Clients Group (ICG) and significant expansion in US retail banking within Citi’s Personal Banking and Wealth Management group played a crucial role in this revenue increase.
InvestingPro data reveals that Citigroup's market cap stands at a solid 81.71B USD, indicating a strong market position. The company's P/E ratio is at a low 6.69, which, according to an InvestingPro tip, suggests that the stock is trading at a low earnings multiple. Despite the challenges, the company has managed to maintain dividend payments for 13 consecutive years, a fact that has been appreciated by income-focused investors.
Despite these gains, Citigroup experienced a marginal decrease in net interest income due to the rising costs of interest-bearing deposits. The bank also saw an increase in operating expenses by 6% to $13.5 billion, largely driven by investments in risk and controls, severance, and inflation. Yet, the bank's revenue for the last twelve months (LTM2023.Q2) stands at a substantial 70.8B USD, showcasing its strong earning capacity.
A noteworthy factor in Citigroup's Q3 performance was the divestiture-related impacts of $299 million before taxes, primarily stemming from the sale of Citi’s Taiwan consumer business. This divestment is part of CEO Jane Fraser's restructuring plan that involves management rationalization and business divestment. While this plan has not fully manifested yet, it contributed to a minor expense drop quarter-over-quarter but led to a 6% YoY rise in expenses.
Despite the positive financial results, Citigroup's shares are trading at $42.7, far below their peak value of $600 in 2000, making it the second-worst performing stock over the last 25 years.
The bank ended Q3 with loans totaling $666 billion, reflecting a 3% YoY growth mainly due to the expansion in US retail banking. However, deposits fell by 3% YoY to approximately $1.3 trillion. The cost of credit also rose to $1.8 billion from $1.4 billion YoY, attributed to normalization in net credit losses and card volume growth.
In conclusion, Citigroup's financial performance shows signs of strength, but it also reveals areas of concern. The InvestingPro Tips suggest that investors should keep an eye on the company's earnings and cash flow, as poor performance in these areas may force dividend cuts. For more detailed insights and tips, consider checking out the InvestingPro product that includes additional tips, providing a more comprehensive understanding of the company's financial health.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.