C's Business Overhaul Progresses Well: Is This Convincing Investors?

Citigroup Inc. C has been emphasizing leaner, streamlined operations to reduce expenses. The transformation process includes an organizational restructuring, which resulted in a streamlined and straightforward management structure aligned with and supporting the bank's strategy.   

In January 2024, the bank announced plans to cut 20,000 jobs, approximately 8% of its global staff, by 2026. So far, the bank has made significant progress, reducing its headcount by 10,000 employees.

Also, Citigroup has been focusing on growth in its core businesses by streamlining its international operations. In April 2021, C announced plans to exit the consumer banking business in 14 markets across Asia and EMEA. The freed-up capital is likely to be reallocated to higher-return segments like wealth management and investment banking.

In sync with this, last month, Citigroup, through its subsidiary Citibank Europe Plc, announced that Citi Handlowy agreed to sell its consumer banking business in Poland. The company has already successfully exited consumer banking businesses in nine countries — Australia, Bahrain, India, Indonesia, Malaysia, the Philippines, Taiwan, Thailand and Vietnam. 

As part of its strategy, Citigroup continues to make progress with the wind-downs of its Korea consumer banking operations and its overall operations in Russia. It is also preparing for an initial public offering of its consumer banking and small business, and middle-market banking operations in Mexico.

Through such initiatives, the company expects revenues to see a compounded annual growth rate of 4-5% by 2026-end and will further drive $2-2.5 billion of annualized run rate savings. Management expects the return on tangible common equity to be 10-11% by 2026.

Key Competitors Challenging Citigroup

Wells Fargo WFC is making efforts to strengthen its operations. While the bank is reducing headcount and streamlining processes, it is investing in its branch network and upgrading digital tools to augment the customer experience. As part of its attempts to improve the branch experience, Wells Fargo is investing more in branch staff and upgrading technology. This allows it to maintain a focus on cost management while enhancing customer service and accessibility. With such strategic efforts, Wells Fargo expects $2.4 billion of gross expense reductions in 2025, driven by efficiency initiatives.

Bank of America BAC continues to strengthen its operations by aligning its banking centers according to customer needs. The bank has embarked on an ambitious expansion plan to open financial centers in new and existing markets. By 2027, Bank of America plans to expand its financial center network by opening more than 150 centers. It also remains committed to providing modern and state-of-the-art financial centers through its ongoing renovation and modernization project. These initiatives will enable Bank of America to improve its digital offerings and cross-sell several products, including mortgages, auto loans and credit cards.

C’s Price Performance, Valuation & Estimates

Shares of Citigroup have gained 10.4% year to date compared with the industry’s growth of 9.6%. Meanwhile, BAC shares have gained 2.2% and WFC has risen 8.8% in the same time frame.

Price Performance

From a valuation standpoint, C trades at a forward price-to-earnings (P/E) ratio of 9.42X, below the industry’s average of 13.70X.

Price-to-Earnings F12M

The Zacks Consensus Estimate for C’s 2025 and 2026 earnings implies a year-over-year rise of 23% and 25.9%, respectively. The estimates for 2025 and 2026 have been revised upward over the past 30 days.

Estimate Revision Trend

Citigroup currently carries a Zacks Rank #3 (Hold). 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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