Citigroup shares fall as cost fears offset record revenue
Citigroup posted record quarterly revenue and a 45% jump in net income, but its shares fell as investors questioned whether rising investment costs will drag down second-half profitability.
Citigroup shares declined after the bank reported its highest quarterly revenue in a decade, a performance overshadowed by investor anxiety over rising expenses and conservative full-year guidance. Net income surged 45% to $5.8 billion, or $3.15 per share, easily beating analyst estimates of $2.74 per share. Revenue climbed 14% year-on-year to $24.8 billion.
The stock's negative reaction centered on the bank's decision to maintain its full-year return on tangible common equity (ROTCE) target of 10% to 11%. This cautious outlook puzzled analysts, given that Citigroup achieved a 13% ROTCE in the second quarter. The guidance suggests management expects profitability to contract in the second half as the lender increases spending. Chief Executive Jane Fraser noted the bank is considering accelerating some medium-term investments, though she ruled out major acquisitions.
Underlying the strong second-quarter figures was a surge in trading revenue driven by geopolitical volatility, including tensions between the U.S. and Iran. The uncertainty prompted clients to adjust their portfolios, lifting equities trading revenue by 45% and fixed-income revenue by 7%. Within fixed income, commodities and other businesses posted a 25% gain, while rates and currencies edged up 1%.
Investment banking also contributed significantly. Citigroup acted as an underwriter for SpaceX’s $75 billion initial public offering and advised on the $44.8 billion combination of Unilever and McCormick’s food businesses. Chief Financial Officer Gonzalo Luchetti stated that Middle East tensions have not yet disrupted the deal pipeline, though executives faced persistent questions about the expense outlook during the earnings call.
The results mirror a broader trend across Wall Street, with JPMorgan Chase, Goldman Sachs, Wells Fargo and Bank of America all reporting robust profits fueled by trading and advisory activity. For Citigroup specifically, the numbers reflect ongoing progress in Fraser’s multi-year restructuring. The bank is simplifying its organizational structure and divesting international consumer businesses to strengthen risk controls following 2020 regulatory actions, a strategy that has gradually narrowed its valuation gap with peers.
Beyond trading, the bank's core lending and wealth units showed resilience. Net interest income rose 13%, while the U.S. cards division posted a 12% increase in net income to $852 million. Wealth management, a key focus for generating stable fee income, generated $3.18 billion in revenue, up 13% from a year ago, achieving a 14.4% ROTCE that remains below some larger rivals.
