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Citigroup stock (NYSE: C) has gained about 44% year-to-date, compared to the 27% rise in the S&P 500 index over the same period. Citi’s peer Wells Fargo (NYSE: WFC) is up by an even stronger 54% YTD. Let’s take a look at Citi’s recent performance and outlook.

Citi’s Q3 2024 earnings outperformed street expectations. While revenue rose 1% to $20.3 billion compared to last year, net income stood at $3.2 billion, down about 8% compared to last year. While revenues benefited from growth in the investment banking and wealth management segments, earnings were impacted by higher cost of credit and higher provisions for potential loan losses. Banking revenues rose 18% year-over-year, led by a 31% gain in its investment banking arm although net interest income fell 3% year over year to $13.4 billion as margins contracted. On the market side of the business, equity revenues were up 32% year-over-year, while wealth management revenues were up 9% year-over-year.

Notably, C stock has performed worse than the broader market in each of the last 3 years. Returns for the stock were 1% in 2021, -22% in 2022, and 19% in 2023. In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, is less volatile. And it has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics. Given the current uncertain macroeconomic environment around rate cuts and multiple wars, could C face a similar situation as it did in 2021, 2022, and 2023 and underperform the S&P over the next 12 months – or will it see a strong jump?

Looking ahead, things could get better. The company’s net interest income could pick up driven in part by the Federal Reserve rate cuts which started in September. The company indicated that it is witnessing some stabilization in loan delinquency among its retail clients, with the bank indicating that it had allocated sufficient reserves to cover potential defaults or losses from these loans. Citi has also been looking to streamline itself and resolve its longstanding regulatory issues by fixing its processes, including better governance and data management.

Separately, the election of Donald Trump to the U.S. presidency for a second term is also expected to benefit the financial sector at large. Investors are betting that the Trump administration’s focus on deregulation could translate into a more lenient approach to bank oversight versus the Biden administration. This could help banks boost their revenues, via higher deal volumes, and lending activity, as well as possibly lower compliance costs which could boost profitability. Trump has also favored tax cuts, which could also help the bottom lines of banks such as Citi. Republicans, who generally favor free markets, have won control of the Senate and the House of Representatives as well. Overall, lower interest rates and more political certainty post-election could spur investment banking activity, with increased debt and equity issuances and M&A-related activity also poised to increase. We believe Citi stock is fairly valued at current levels, trading at about $72 per share, roughly in line with the Trefis estimates for Citi’s valuation.

[1] Returns as of 12/8/2024
[2] Cumulative total returns since the end of 2016

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.