Citi CFO Says Credit Card Rate Caps Would Shrink Credit, Hurt Economy

Citigroup (NYSE:C) stock fell Wednesday after the bank posted a mixed fourth quarter, with earnings beating expectations but revenue missing estimates.

Divestiture-related losses tied to its Russia exit and rising expenses overshadowed strong net interest income growth and robust investment banking momentum.

The bank reported fourth-quarter revenue (net of interest expense) of $19.87 billion, up 2% year over year but below the analyst consensus of $20.53 billion. Excluding divestiture-related impacts tied to the planned sale of AO Citibank in Russia, revenue increased 8%.

Net income declined 13% year over year to $2.5 billion, reflecting a $1.1 billion after-tax loss related to the Russia exit. Adjusted net income totaled $3.6 billion, while adjusted earnings per share came in at $1.81, exceeding expectations of $1.68.

Net interest income rose 14%, supported by strength across Markets, U.S. Personal Banking, Services, Wealth, Legacy Franchises, and Banking, partially offset by a decline in Corporate/Other. Non-interest revenue fell 27%, driven by weakness in Legacy Franchises, Markets, U.S. Personal Banking, and Wealth, partly offset by gains in Banking and Services. Operating expenses increased 6% to $13.8 billion, pushing the efficiency ratio up 250 basis points year over year to 69.6%.

Return on average tangible common equity declined 100 basis points to 5.1%. The Common Equity Tier 1 capital ratio stood at 13.2% for the quarter, approximately 160 basis points above the current regulatory requirement. Cost of credit rose 2% to $2.2 billion, primarily reflecting higher net credit losses in U.S. cards.

By segment, Services revenue increased 15% to $5.9 billion. Excluding the Russia-related item, growth was 8%, driven by continued expansion in Treasury and Trade Solutions and Securities Services. Markets revenue declined 1% to $4.5 billion, reflecting lower fixed income and equity markets activity.

Banking revenue surged 78% to $2.2 billion, led by growth in corporate lending, excluding mark-to-market impacts on loan hedges, and stronger investment banking performance. Investment banking revenue climbed 38% to $1.3 billion, supported by a 35% increase in fees driven by advisory and debt capital markets activity, partially offset by weaker equity capital markets.

Wealth revenue rose 7% to $2.1 billion, supported by growth in Citigold and the Private Bank, partly offset by lower results in Wealth at Work. U.S. Personal Banking revenue increased 3% to $5.3 billion, driven by gains in Branded Cards and Retail Banking, while Retail Services declined.

Citi Chair and CEO Jane Fraser said the company delivered strong progress in 2025, driven by record revenue and positive operating leverage across all five business lines.

She said Citi's Services benefited from deeper client relationships and new mandates, Markets maintained a top-three industry position while improving returns, and Banking played a central role in many of the year's largest transactions.

Fraser added that Wealth posted a strong performance and launched several major partnerships, while U.S. Personal Banking doubled its returns by focusing on customer engagement and new product offerings.

She said Citi returned more than $17 billion to shareholders during the year, the largest capital return since the pandemic, including $13 billion through share repurchases.

The bank, which this week suffered a hit to its stock after President Donald Trump demanded a 10% cap on credit-card fees, said revenue from branded cards rose 5% to $2.95 billion.

Earnings Call

Citigroup CFO Mark Mason said the bank is closely monitoring current market reactions and emphasized that Citi has minimal exposure to the situation in focus, noting that its operations in Venezuela were sold in 2021, including both corporate and retail businesses. While Citi is tracking developments, Mason declined to comment on any future business plans involving the country.

On deal activity, Mason said Citi continues to see sustained momentum in mergers and acquisitions, with several large, landmark transactions in the pipeline, specifically citing Boeing Company (NYSE:BA), Mars, and Mr. Cooper. He added that Citi remains among the top three banks in debt capital markets.

Mason said the U.S. economy has remained resilient despite ongoing geopolitical risks, and highlighted that the U.S. consumer is holding up well, with spending by Citi credit card clients up 5%.

Addressing credit card regulation, Mason stressed that affordability is an important issue, but said Citi cannot support an interest rate cap on credit cards, warning that such a cap would reduce credit availability and have a deleterious effect on the economy.

On operations and outlook, Mason said Citi expects headcount to continue to decline in 2026. He also confirmed that the bank is still preparing for the Banamex IPO, following the sale of a 25% stake to an investor.

Finally, Mason underscored the importance of Federal Reserve independence, saying it is critical that the next Fed Chair operates with the same commitment to independence as the current leadership.

Outlook

Citigroup expects fiscal 2026 Net interest income ex-Markets up 5%-6% Y/Y driven by continued momentum in Services, Banking and Wealth.

It expects 2026 Branded Cards NCL range of 3.50% to 4.00% and the Retail Services NCL range of 5.75% to 6.25%.

It reiterated that the ACL build will be a function of the macroeconomic environment and business volumes.

Looking ahead, Fraser said Citi enters 2026 with clear momentum across the firm and remains focused on achieving its 10%–11% return on tangible common equity target for the year, while positioning the company to deliver even stronger returns in the years that follow.

Citigroup plans to eliminate about 1,000 jobs this week as CEO Jane Fraser continues efforts to control costs and lift returns, Bloomberg reported on Tuesday.

The cuts advance a restructuring plan unveiled two years ago that targets 20,000 job reductions by the end of 2026.

The bank is shrinking its workforce as it streamlines operations, exits much of its international retail business, and reorganizes core units to improve performance.

Citigroup employed about 227,000 people at the end of September and aims to bring that total down to roughly 180,000 by 2026.

C Price Action: Citigroup shares were down 1.75% at $114.26 at the time of publication on Wednesday, according to Benzinga Pro data.

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