Citigroup Inc. (C) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary and Q&A reveal strong financial performance, strategic investments, and plans for capital return, indicating a positive outlook. Despite some uncertainties, such as regulatory timelines, the focus on growth, efficiency, and shareholder returns suggests a favorable market reaction.
Key Financial Performance
Adjusted EPS $1.81, with a year-over-year improvement. The improvement was attributed to the exclusion of a notable item and overall strong business performance.
Adjusted RoTCE 7.7%, with a year-over-year improvement. The improvement was attributed to better capital efficiency and strong business results.
Adjusted Net Income Surpassed $16 billion, with a 27% year-over-year increase. The increase was driven by adjusted revenues up 7% and positive operating leverage across all five businesses.
Services Revenue Up 8% year-over-year. Growth was driven by a 6% increase in fee revenue and a 10% increase in cross-border transaction value, supported by deepened client relationships and global network support.
Securities Services Assets Under Custody and Administration Grew 24% year-over-year. Growth was attributed to existing client growth and onboarding of new client assets.
Markets Revenue Record revenues, with a 10% increase in fixed income despite challenges in commodities. Equities revenues reached $5.7 billion, a record with over 50% increase in prime balances.
Banking Revenue Up 32% year-over-year. Growth was driven by record M&A revenues, share gains in target sectors, and strong performance in leverage finance and with sponsors.
Wealth Revenue Up 14% year-over-year. Growth was attributed to 8% organic NNIA growth and strategic partnerships with industry leaders like BlackRock.
Branded Cards Revenue Up 8% year-over-year. Growth was driven by robust customer engagement in spending, borrowing, and new account acquisitions.
Capital Return Over $17.5 billion returned to shareholders, including $13 billion in share repurchases and $4.5 billion in the fourth quarter. This was the highest since the pandemic.
CET1 Ratio Ended the year at 13.2%, 160 basis points above the regulatory capital requirement. This indicates ample capital to support growth and return excess capital to shareholders.
Net Income (Q4 2025) $2.5 billion, with adjusted net income of $3.6 billion. The adjusted figure excludes the impact of the held-for-sale accounting treatment of Citi's remaining operations in Russia.
Total Revenues (Q4 2025) $19.9 billion, up 2% year-over-year. Adjusted revenues were up 8%, driven by growth in Banking, Services, USPB, and Wealth.
Expenses (Q4 2025) $13.8 billion, up 6% year-over-year. The increase was driven by higher compensation and benefits, tax charges, legal expenses, and technology investments.
Cost of Credit (Q4 2025) $2.2 billion, primarily consisting of net credit losses in U.S. cards.
Full-Year Revenue (2025) $85.2 billion, with adjusted revenues of $86.6 billion, up 7% year-over-year. This was the strongest growth in over a decade, driven by investments in the franchise.
Full-Year Expenses (2025) $55.1 billion, with adjusted expenses of $54.4 billion. The increase was driven by higher compensation, technology investments, and restructuring charges.
Services Net Income (Q4 2025) $2.2 billion, with an RoTCE of 36.1%. Growth was driven by higher deposit balances, deposit spreads, and fee growth.
Markets Net Income (Q4 2025) $783 million, with an RoTCE of 6.2%. Growth was supported by financing activity in spread products and prime services.
Banking Net Income (Q4 2025) $685 million, with an RoTCE of 13.2%. Growth was driven by record M&A revenues and share gains in target sectors.
Wealth Net Income (Q4 2025) $338 million, with an RoTCE of 10.9%. Growth was driven by higher deposit spreads and client investment asset growth.
USPB Net Income (Q4 2025) $845 million, with an RoTCE of 14.3%. Growth was driven by higher branded cards revenue and retail banking performance.
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Operating Highlights
Citi Token Services: Integrated with 24/7 U.S. dollar clearing, launched in Hong Kong and Dublin, and added euro as a transaction currency.
Citi Payments Express: Expanded to 22 markets, processing 40% of TTS' payments during Q4.
Single event processing: Launched to enable near real-time asset servicing as part of a unified custody infrastructure.
Cross-border transaction value: Increased by 10% as part of deepening client relationships.
Securities Services: Assets under custody and administration grew 24% due to existing client growth and onboarding of new client assets.
Investment banking: Citi had a role in 15 out of the 25 largest investment banking transactions of the year, driving a 30-basis-point increase in wallet share.
AI and automation: Deployed AI tools in 84 countries with over 21 million interactions, achieving 70% adoption. Focused on reengineering processes like KYC and loan underwriting to improve client experience and reduce expenses.
Capital return: Repurchased over $13 billion in common shares and increased dividends, resulting in a total capital return of $17.5 billion.
Efficiency improvements: Achieved positive operating leverage for the second straight year across all five businesses.
International divestitures: Signed agreements to sell consumer business in Poland and operations in Russia, and closed the sale of a 25% stake in Banamex.
Transformation progress: Over 80% of programs are at or near target state, with significant milestones achieved in operational capabilities and controls.
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Risk or Challenges
Regulatory Compliance: The company is still undergoing a transformation to address regulatory compliance issues, as evidenced by the OCC's removal of Article 17 of the consent order. However, there is more work to be done to fully meet regulatory expectations.
Economic Environment: While the global economy shows signs of optimism, challenges such as slower domestic consumer demand in China and anemic growth in Europe, particularly Germany, could impact the company's international operations.
Credit Risk: The company maintains a high-quality credit portfolio, but net credit losses in U.S. cards and the need for reserves to account for potential unemployment scenarios indicate ongoing credit risk.
Operational Efficiency: Despite progress in reducing headcount and achieving productivity savings, expenses have increased due to higher compensation, benefits, and technology investments, which could pressure margins.
Market Conditions: Fixed income revenues faced challenges, particularly in commodities, and equities revenues showed a decline in cash transactions, indicating potential vulnerabilities in market-driven revenue streams.
Transformation Costs: The ongoing transformation, including investments in AI and automation, continues to incur significant costs, which may impact short-term financial performance.
Geopolitical Risks: The company is in the process of exiting operations in Russia and selling its consumer business in Poland, which could pose risks related to geopolitical and operational uncertainties.
Customer Engagement: Retail services showed revenue softness, and growth in branded cards was offset by higher rewards costs, indicating challenges in maintaining customer engagement and profitability.
Capital Allocation: While the company has ample capital, the focus on share buybacks and dividend increases may limit resources available for other strategic investments.
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Guidance & Outlook
Revenue Growth: Net interest income (NII) excluding markets is expected to grow between 5% and 6% in 2026, driven by higher loan volumes in cards and wealth, and deposit volumes in services and wealth.
Operating Efficiency: The company targets an efficiency ratio of around 60% for the full year 2026, supported by disciplined expense management and productivity savings.
Capital Return: Citi will continue its $20 billion share buyback program in 2026, prioritizing returning capital to shareholders.
Credit Metrics: Card net credit losses (NCLs) are expected to remain within the ranges provided for 2025.
Fee Momentum: Continued fee momentum across businesses is expected to drive growth in non-interest revenue (NIR) excluding markets.
Economic Outlook: The global economy is expected to sustain growth in 2026, supported by normal inflation levels, accommodating central banks, strong capital investment in tech, and consumer health. However, challenges include slower domestic demand in China and anemic growth in Europe.
Strategic Priorities: Citi aims to achieve a return on tangible common equity (RoTCE) of 10% to 11% in 2026, with a focus on completing its transformation and maintaining positive operating leverage.
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Shareholder Return Plan
Dividend Increase: Citi increased its dividend, contributing to a total capital return of over $17.5 billion, the highest since the pandemic.
Share Repurchase: Citi repurchased over $13 billion in common shares during the year, including $4.5 billion in the fourth quarter, as part of its $20 billion buyback program.
Capital Return Plan: Citi plans to continue returning excess capital to shareholders, supported by a CET1 ratio of 13.2%, which is 160 basis points above the regulatory requirement.
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Key Q&A
Q:What is the reason behind the flattish revenues in the Markets segment despite growth in PB balance, trading assets, and loans?
A:Mark Mason explained that the top-line revenue for the full year in Markets was up 11%, showing strong performance. The fourth quarter faced tough year-over-year comparisons due to a strong prior year. Growth was driven by spread products and equities, supported by prime activities. The optimization of RWA and allocation of balance sheet to higher-returning areas contributed to the higher RoTCE.
Q:Why has the efficiency ratio target changed from below 60% to around 60%?
A:Mark Mason clarified that the change allows for flexibility to invest in the business beyond 2026. The focus remains on achieving a 10%-11% return by 2026, balancing expense discipline with investments for long-term growth.
Q:What progress has been made in Citi's transformation efforts, and what remains to be done?
A:Jane Fraser stated that over 80% of the transformation is at or near the target state, particularly in compliance, risk, and controls. Data improvements have accelerated, aided by AI. Remaining work includes validation by internal audit and regulatory assessment. The timing for regulatory closure is uncertain and depends on the regulators.
Q:How does Citi plan to address the gap with best-in-class peers in investment banking and capital markets?
A:Jane Fraser highlighted investments in technology, innovations, and talent acquisition. Citi is focusing on scaling services, improving market capabilities, and expanding in areas like wealth and cards. The goal is to be a top player in all engaged businesses, with a long-term investment mindset.
Q:What is the outlook for fee revenue growth and Markets NII in 2026?
A:Mark Mason expects continued fee growth driven by investments in wealth, services, and securities. Markets revenue is expected to be relatively flat year-over-year, with NII likely to increase due to growth in spread products and financing activities.
Q:What actions has Citi taken to reduce asset sensitivity, and how does it impact NII?
A:Mark Mason explained that Citi has actively managed its investment portfolio to reduce asset sensitivity, particularly in non-U.S. dollar portfolios. This includes exiting certain securities to prepare for potential rate declines, contributing to a positive NII outlook.
Q:What is Citi's approach to capital return and CET1 buffer?
A:Mark Mason stated that Citi is targeting a 100 basis point management buffer above the CET1 minimum. The firm plans to work towards a 12.6% CET1 ratio over the next few quarters and expects to increase buybacks in 2026.
Q:What is driving strong deposit growth in Citi's Services segment?
A:Mark Mason attributed the growth to strong client relationships, expansion into new markets, and targeting commercial and middle-market clients. The focus on operating deposits and client engagement supports sustainable growth.
Q:What is Citi's stance on credit card rate caps and affordability initiatives?
A:Jane Fraser emphasized that while Citi supports affordability initiatives, it does not support rate caps, as they could restrict credit access and harm consumer spending. Citi offers lower-cost products and has eliminated overdraft fees to support affordability.
Q:What is the progress and strategy for Citi's Mexico divestiture?
A:Jane Fraser reported progress with the sale of a 25% stake and plans to sell additional smaller stakes leading up to an IPO. The timing and structure will depend on market conditions, with the goal of maximizing shareholder value.
Q:What is the outlook for Citi's Wealth business and its EBIT margin?
A:Jane Fraser and Mark Mason highlighted strong growth in client investment assets and revenues. The medium-term EBIT margin target is 20%, with a long-term goal of 25%-30%. Continued investments in talent, technology, and client experience are expected to drive growth.
Q:What is Citi's efficiency ratio target and long-term return trajectory?
A:Mark Mason stated that the 60% efficiency ratio is a waypoint, not the final target. Citi aims to balance expense flexibility with long-term investments to achieve higher returns. The focus is on revenue growth, expense efficiencies, and capital optimization.
Q:What is the outlook for card NCLs in 2026?
A:Mark Mason stated that the range for card NCLs remains the same as 2025, with allowances for macroeconomic uncertainties. Current delinquency trends are in line with expectations.
Q:What is driving deposit growth in Citi's TTS and Security Services?
A:Mark Mason highlighted strong client relationships, expansion into new markets, and targeting commercial and middle-market clients as key drivers. The focus on operating deposits and client engagement supports sustainable growth.
Q:What is Citi's strategy for achieving higher returns and efficiency improvements?
A:Jane Fraser and Mark Mason emphasized a combination of revenue growth, expense efficiencies, and capital optimization. Investments in technology, talent, and client experience are key to driving long-term returns and efficiency improvements.
Q:Review of Unclear Management Responses
A:Management avoided providing a specific timeline for regulatory closure of the transformation efforts, stating that the timing depends on the regulators. Additionally, they did not provide detailed guidance on buybacks for 2026 or a precise long-term efficiency ratio target, deferring such discussions to the upcoming Investor Day.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI bank
Airlines Costco
Article consent
Banamex Russia
Banking record
BlackRock architecture
Blackstone TPG
Boeing Pfizer
CEO Chair
CEO remediation
CFO job
Card portfolio
Cards engagement
Chair progress
China export
Colleagues country
Costco partnership
Day path
Dublin euro
Europe step
Express market
Fee transaction
Germany
Investor Day
Johnson
RoTCE
capital return
client experience
consent order
infrastructure
journey
people
record revenue
return basis
risk control
solution
tech
C Transcript
Citigroup Inc. (C) Q4 2025 Earnings Call Transcript
Positive1-14
The earnings call summary and Q&A reveal strong financial performance, strategic investments, and plans for capital return, indicating a positive outlook. Despite some uncertainties, such as regulatory timelines, the focus on growth, efficiency, and shareholder returns suggests a favorable market reaction.
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