Citigroup Earnings: Banking Strengths Offset by Write-Downs as RoTCE Still Lags Targets

The headline beat in adjusted EPS masks deeper challenges: Citigroup’s Q4 saw solid growth in core fee businesses and banking revenue—investment banking fees rose 35% and banking unit revenue surged 78% YoY. This confirms that the rebound in dealmaking late in 2025 is a material inflection point rather than a short-term blip. However, under the GAAP umbrella, net income dropped about 13% to $2.47B, reflecting a $1.2B pre-tax loss tied to the divestment of its Russian unit. Thus, while the underlying operations are strong, one-off charges remain a drag.

RoTCE remains a central metric. At 5.1% in Q4 and 7.7% excluding Russia, it lags the firm’s public target of 10-11% for 2026. Achieving that will require continued revenue growth, tight cost discipline, and successful exits of non-core assets. Citi’s efforts with Banamex offer both hope and risk: selling 25% to Fernando Chico Pardo for ~$2.3B shows progress, but the broader IPO and further divestitures hinge on regulatory approvals and valuation—risks that cannot be understated.

Operationally, Citi is investing in growing segments: wealth management up ~7%, prime brokerage revenue jumping over 50%, and strong performance in services and Treasury/Trade functions. But costs rose ~6% YoY, driven by compensation, taxes, legal, and technology. Meanwhile, market volatility weighed on trading income in Q4, though the full-year market revenues rose ~11%.

Strategically, under CEO Jane Fraser, Citi seems increasingly serious about simplifying the bank: selling or structuring exits of international consumer operations, pushing automation and AI, and reducing headcount (≈1,000 jobs in the latest plan). The regulatory environment is also improving: the OCC withdrew a 2024 amendment to Citi’s 2020 consent order related to data and control deficiencies, which indicates progress in its risk posture.

Key open questions remain: Can Citi sustain fee-based revenue growth in a higher rate, possibly slower M&A environment? Can market revenues rebound if volatility and risk sentiments decline? Will the IPO of Banamex deliver acceptable valuation given macro, political, and regulatory headwinds in Mexico? And finally, will the cost base be managed tightly enough to reach the 10-11% RoTCE target without hurting investment in growth or compliance?