C Projects Higher Q2 IB & Markets Revenues: Fee Income to Benefit?

Despite tariff-related headwinds, Citigroup C expects the performance of its Markets and Banking segments to improve in the second quarter of 2025. This was disclosed by Viswas Raghavan, head of Banking, at Morgan Stanley US Financials, Payments & CRE Conference on Tuesday.

Citigroup’s trading desks have been busy in the second quarter, with equities and fixed-income recording strong momentum. The bank projects markets revenues to grow in the mid-to-high single digits range on a year-over-year basis. Further, investment banking (IB) revenues are expected to increase by a mid-single-digit percentage. 

Raghavan noted that market activity came to a standstill in April due to ambiguity over the final tariff decision, but transaction volumes have since recovered alongside a stock market rebound. He added that merger & acquisition (M&A) activity remains strong with active deal discussions, and debt markets are expected to follow through with acquisition financing. Some IPOs, mainly in tech and digital assets, have returned, but the overall market remains sluggish, especially for tariff-affected sectors.

Additionally, Citigroup expects the cost of credit to be “up a few hundred million” sequentially, driven by higher credit reserve build. 

As IB and markets revenues improve this quarter and optimism over deal-making activities continues, Citigroup is expected to witness a rise in fee income. The non-interest revenues constitute almost 33% of the company’s total revenues.

What Do Citigroup’s Competitors Say About IB Prospects?

Citigroup is not the only one that is optimistic about the IB business prospects. At the same conference, Morgan Stanley MS CEO Ted Pick stated that deal-making and equity capital market activity are gaining momentum, with deal discussions remaining resilient and even accelerating in certain sectors. Further, Morgan Stanley is expected to end the second quarter on a solid note. 

Likewise, Moelis & Company's MC incoming CEO Navid Mahmoodzadegan told investors that the deal-making environment is rebounding, with confidence returning after a temporary pause in April due to U.S. tariff concerns. He further noted that Moelis & Company's deal pipeline is up from April and is as high as "it's ever been at the firm, or close to it.”

C’s Price Performance, Valuation & Estimates

Shares of Citigroup have gained 11.3% this year. Morgan Stanley has jumped 4.8% but Moelis & Company declined 21.5% in the same time frame.

YTD Price Performance
 

From a valuation standpoint, C trades at a forward price-to-earnings (P/E) ratio of 9.60, below the industry’s average of 13.80X.

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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