Can Robust Capital Markets Support Citigroup's Fee Revenues?

Citigroup C expects third-quarter 2025 investment banking (IB) fees and market revenues to increase in the mid-single-digit percentage points on a year-over-year basis. At the Barclays Global Financial Services Conference, Citigroup’s CFO, Mark Mason, said that the firm is witnessing “good momentum across all of our investment-banking products.”

In the last reported quarter, driven by growth in advisory and equity capital markets, Citigroup registered a 15% year-over-year increase in IB revenues. Its markets revenues had increased 16% year over year to $5.9 billion.

The banking giant’s IB business growth has recently been driven by a combination of strong capital markets activity, a surge in mergers and acquisitions, increased initial public offerings, robust client demand, and effective execution in a volatile macro environment.

Heightened volatility and bullish sentiment among institutional investors have been driving additional flows into risk assets, propelling the IB fee momentum for Citigroup.

Notably, Citigroup’s CEO, Jane Fraser’s turnaround strategy, which includes business simplification, cost discipline and selling non-core assets, has also improved efficiency and allowed the bank to redeploy resources into high-growth sectors. The bank has been hiring to reinforce its IB teams in growth markets like Asia and technology-driven fields. Citigroup’s diversified client base and high-conviction sectors make it more competitive, allowing it to outperform its rivals in fee revenue growth.

Capital Markets Business Expectations of C’s Peers

JPMorgan JPM expects robust capital markets growth in 2025, supported by active deal-making, increased trading, technology-led expansion and favorable macro trends, though management remains mindful of volatility and risks ahead.

At the Barclays conference, JPMorgan’s co-CEO of commercial and investment bank, Doug Petno, said that IB revenues will grow in the low-double digits in third-quarter 2025. Also, JPMorgan’s markets revenues are expected to grow in the high-teens percentage rate for the to-be-reported quarter.

Likewise, Goldman Sachs’ GS CEO, David Solomon’s comments at the conference reflected confidence in the company’s IB pipeline, with expectations for continued growth as deal flow accelerates and technology investments pay off.

In the second quarter of this year, the volatile market lifted Goldman Sachs’ net revenues in Equities by 36% year over year. Fixed income, currency and commodities trading revenues rose 9% year over year. IB fees grew 26%, driven by significantly higher net revenues in Advisory, reflecting strength in the Americas and EMEA.

Citigroup’s Price Performance, Valuation & Estimates

Shares of Citigroup have gained 38.3% year to date compared with the industry’s growth of 22.8%.

From a valuation standpoint, C trades at a forward price-to-earnings (P/E) ratio of 10.76X, below the industry average of 14.52X.

The Zacks Consensus Estimate for C’s 2025 and 2026 earnings implies year-over-year growth rates of 27.2% and 28.1%, respectively. Estimates for both 2025 and 2026 have been revised upward over the past 60 days.

Citigroup currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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