Citigroup, Inc. C shares have gained 8.2% compared with the industry’s growth of 5.7% since the release of its first-quarter 2025 results on April 15. This reflected investor optimism over the bank’s quarterly performance and positive broader market sentiments. 

Price Performance

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C registered year-over-year top and bottom-line growth. The metrics surpassed the Zacks Consensus Estimate.

Following the decent quarterly results, is Citigroup stock worth adding to your portfolio? Before checking that out, let us discuss the company’s quarterly performance in brief.

Citigroup’s 1Q25 Highlights

Net Interest Income (NII): In the first quarter of 2025, Citigroup reported an NII of $14 billion, marking a 4% increase from the prior-year quarter. This growth was driven by higher deposit spreads and increased loan balances, particularly in the U.S. Personal Banking and Services segments. Citigroup’s peer Wells Fargo’s WFC NII declined 6% year over year, while that for Bank of America BAC rose 3% in the first quarter.

Non-Interest Income: C’s non-interest revenues of $7.6 billion rose 1% year over year. This was primarily driven by strong momentum across Markets, banking (especially investment banking) and wealth divisions, partially offset by a decline in the All Other segment.

Non-Interest Expenses: Citigroup’s operating expenses declined 5% year over year to $13.4 billion. This decrease was primarily attributable to reduced FDIC special assessment expenses, the absence of restructuring charges and lower compensation expenses. For Wells Fargo, non-interest expenses declined 3%, while Bank of America reported a 3% increase in the first quarter.

Asset Quality: The company's asset quality was mixed in the quarter. Total non-accrual loans fell 2% year over year to $2.7 billion. The allowance for credit losses on loans was $18.7 billion, down 2%. However, C’s provisions for credit losses and benefits, and claims for the first quarter were $2.7 billion, up 15% from the year-earlier quarter, reflecting a deterioration in the macroeconomic outlook and increased net credit losses in the card portfolios.

What Lies Ahead for C Stock?

Business Restructuring Efforts: Citigroup has been emphasizing leaner, streamlined operations to reduce expenses. The transformation process included an organizational restructuring that replaced the reportable segment with five new ones. In January 2024, the company announced the plan to eliminate 20,000 jobs as part of its broad-scale restructuring effort over the next two years.

C remains on track to cut jobs. In 2024, the company reduced its headcount by roughly 10,000. In January 2025, citing people familiar with the matter, Blomberg reported that as part of the sweeping reorganization under CEO Jane Fraser to cut expenses, managing directors in the wealth and technology units are leaving the firm, and Citigroup is axing people from a team that compiles data and analysis on the bank's clients.

For 2025, management expects expenses below $53.4 billion. In 2024, the company’s expenses were $53.9 billion.

Focus on Core Operation:  Citigroup has been emphasizing growth in core businesses by streamlining businesses internationally. In April 2021, the company announced its plan to exit the consumer banking business in 14 markets across Asia and the EMEA. 

Since then, the company has exited consumer businesses in nine countries. It reached a milestone in December 2024 when it completed the separation of its institutional banking operations in Mexico from the consumer, small business and middle-market segments. These moves by Citigroup are likely to free up capital to invest in higher-return segments like wealth management and investment banking.

Through such efforts, 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 by 2026. Management expects the return on tangible common equity to be 10-11% by 2026.

Fed Rate Cuts to Drive NII: The Federal Reserve has lowered the interest rates by 100 basis points in 2024 but has kept them steady since then. Given relatively low funding costs, the company’s NII improved since the third quarter of 2024.

Net Interest Income Trend

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The market participants are currently predicting three to four interest rate cuts in the back half of the year. With a decline in interest rates, C’s NII will get a boost.

Citigroup projects NII (ex-Markets) to rise 2-3% in 2025 from the 2024 reported level.

Balance Sheet Position: As of March 31, 2025, C’s cash and due from banks and total investments aggregated to $761 billion, whereas its total debt (short-term and long-term borrowing) was $317.4 billion.

Also, Citigroup's average Liquidity Coverage Ratio stood at 117% for the quarter ended March 31, 2025. 

C’s strong liquidity profile supports its capital distribution activities. In July 2024, the company hiked its quarterly dividend by 6% to 56 cents per share. It also has a share repurchase plan in place. On Jan. 13, 2025, Citigroup's board of directors approved a $20-billion common stock repurchase program with no expiration date. The bank repurchased $1.75 billion of common shares in the first quarter of 2025 and targets a similar level of share repurchases in the second quarter.

Is Citigroup Stock Worth a Betting on Now?

The company’s business restructuring efforts and emphasis on its core operations by divesting non-core units provide a solid foundation for growth, supporting its financials.

Sales Estimates

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Anticipated tax cuts and favorable regulations under the Trump administration will likely act as catalysts for the company in the long run.

From a valuation standpoint, the company appears inexpensive relative to the industry. It is currently trading at a discount with a forward 12-month price-to-earnings (P/E) multiple of 8.65X, below the industry average of 11.94X. 

Price-to-Earnings F12M

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Further, the C stock is significantly cheaper than its peers, Bank of America and Wells Fargo’s current forward 12-month P/E of 10.30X and 11.40X, respectively.

While Citigroup offers profound value with a discounted valuation, the bank remains in the middle of a complex overhaul plan. Though its restructuring strategy is encouraging, it carries execution risk and near-term uncertainty, especially as global economic headwinds because of tariffs and interest rate fluctuations obscure the outlook.

As the interest rates are less likely to come down substantially in the near term, it is expected to hurt the borrowers’ credit profile. Hence, C’s asset quality is expected to remain weak.

Given the concern, the company’s earnings estimates for 2025 and 2026 have been revised downward over the past month. (See the Zacks Earnings Calendar to stay ahead of market-making news.)

Earnings Estimate Revision Trend

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Hence, Citigroup's short-term outlook will depend on how well it manages ongoing macroeconomic and operational challenges. Though it may not be the ideal time to buy the stock, long-term investors with existing holdings may find value in maintaining their stake, given its solid fundamentals. Currently, the stock has 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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