- Key insight: Citi is turning a corner on profitability, CEO Jane Fraser said.
- Forward look: The company plans to disclose future profitability metrics in May.
- Expert quote: “The best part is, there is much more upside ahead,” Fraser said.
UPDATE: This article includes comments made during Citigroup’s earnings call as well as commentary from a bank analyst.
Citi group is finally turning a corner when it comes to consistently strong financial performance, and there’s still plenty of potential for ongoing improvements, CEO Jane Fraser said Tuesday.
The long-underperforming megabank, which Fraser has spent nearly five years reconfiguring into a smaller and simpler organization, surged beyond Wall Street expectations for the third quarter, reporting a 9% year-over-year increase in net income and earnings per share of $1.86, easily topping the average $1.72 that was predicted by analysts polled by S&P Capital IQ.
Each of Citi’s five primary businesses generated record third-quarter revenue as well as positive operating leverage, in which revenues outpaced expenses. Its business and investment banking unit led the way with a 34% increase in revenue compared with the same quarter last year, while U.S. personal banking delivered the 12th quarter in a row of positive operating leverage.
“The consistently strong results that we’ve been delivering are a consequence of how we have fundamentally changed the bank in recent years,” Fraser told analysts Tuesday during Citi’s mid-morning quarterly earnings call. “And the best part is, there is much more upside ahead.”
Investors appeared to like the results. Citi’s share price was up 3.5% by late afternoon.
On the first day of banks’ third-quarter earnings season, Fraser, who is American Banker’s Most Powerful Woman in Banking for the fifth consecutive year, said she remains confident in Citi’s ability to achieve a key profitability metric in 2026. The $2.6 trillion-asset company is targeting a 10-11% return on tangible common equity next year, driven by a combination of continued revenue momentum across the firm, improved efficiency and strategic capital management.
The metric has been closely watched, in part because for so long it was far short of what other similarly-sized banks achieved. It was 8% at Citi during the third quarter, which ended on Sept. 30, and 7% for all of 2024. Meanwhile, the third-quarter return on tangible common equity for the third quarter was 20% and 15.2% at JPMorgan Chase and Wells Fargo, respectively.
Citi has not disclosed its expectations for return on tangible common equity beyond next year. Those details are set to be shared during the bank’s investor day, which is set for May 7, 2026.
Analysts were largely positive on the results. In a research note, Glenn Schorr, an analyst at EverCore ISI, said that while neither the third-quarter return on tangible common equity metric nor the return on equity metric have reached Citi’s targets yet, “you can’t deny the progress [the bank] has been making on its transformation and its execution in the businesses.”
Fraser rolled out an ambitious turnaround plan in 2021 when she took the helm as CEO. At that time, Citi was reeling from a pair of regulatory consent orders stemming from risk management blunders. It was also grappling with missed financial targets and mounting investor frustration.
Read more about bank earnings here: https://www.americanbanker.com/earnings
In the years since, the bank has been focused on an enterprisewide transformation of its risk management and internal controls systems, including enhanced automation and digitization. Over two-thirds of the risk programs are now at or near the bank’s target state, Fraser said.
It’s been a lengthy and costly endeavor. This year alone, Citi expects to spend “a little bit under $3.5 billion” on the overhaul, Chief Financial Officer Mark Mason said on the call. He predicted that the number would come down in 2026, but didn’t provide a range or target number.
Bright spots for the quarter were numerous. Net interest income was up 12% year over year, driven by strong performances in each of the business lines. Noninterest income rose 4%.
Investment banking fees climbed 17% year over year. In its wealth business, Citi recorded net new investment assets of $18.6 billion. And it launched several new products and services, including a new premium credit card.
It also made progress on its plan to divest Banamex, its retail banking franchise in Mexico. In September, the bank said it had cut a deal to sell a 25% equity stake of Banamex to the Mexican businessman, Fernando Chico Pardo, who will pay about $2.3 billion.
The deal is expected to close in the second half of 2026, pending regulatory approvals. The bank plans to divest the rest of the franchise through an initial public offering.
Read more about Citigroup here: https://www.americanbanker.com/organization/citigroup
“The 25% stake is a very significant … step in our path towards deconsolidation and ultimately a full exit, which is what everyone is focused on,” Fraser said. The sale, as well as a subsequent initial public offering of the remaining stake, should maximize shareholder value, she noted.
The Banamex divestiture is one of 14 overseas market contractions that Citi has pursued during Fraser’s tenure. Earlier this year, Citi said its Polish subsidiary, Citi Handlowy, had agreed to sell its consumer banking business to Velobank. That deal is expected to close by mid-2026.
Citi returned $6.1 billion to shareholders in the third quarter, including $5 billion in share repurchases and the rest in dividends. Year to date, the bank has returned $12 billion.
Looking forward, Citi slightly tweaked its guidance for the full year. At the end of July, the bank said that revenues would be $84 billion and expenses would be $53.4 billion. It now expects both of those figures to be higher, but it didn’t specify by how much.
While Fraser expressed a confident tone Tuesday about the bank’s future, she was careful not to get too far ahead in celebrating the recent wins.
“There isn’t, I think, a single person in our firm that feels that we are declaring victory,” Fraser said. “We’ve still got a long way to go.”
