Citigroup's Massive Overhaul Under Jane Fraser Shows Signs Of Paying Off

Core Viewpoint - Bank of America Securities (BofA) maintains a Buy rating on Citigroup, Inc., increasing the price forecast from $89 to $100, indicating confidence in the company's ongoing transformation and potential for profitability improvement [1][4]. Group 1: Company Transformation - Citigroup's overhaul is recognized as one of the most challenging in the corporate sector, but recent strategic moves such as global consumer exits, de-risking, technology upgrades, and new hires suggest that CEO Jane Fraser's vision from 2022 may be on track for success [1]. - All five business segments of Citigroup have demonstrated improved profitability over the past year, reflecting the effectiveness of the company's strategic initiatives [1]. Group 2: Financial Targets and Performance - The wealth and banking segments, now under new leadership, are targeting a Return on Tangible Common Equity (ROTCE) of 15%-20% by 2026, an increase from an estimated ~10% in FY25, indicating significant growth potential [2]. - Citigroup is expected to sustainably exceed the 10% consolidated ROTCE mark starting in 2026, supported by a low base for growth [2]. Group 3: Share Repurchases and Economic Outlook - Share repurchases are anticipated to accelerate in the second half of 2025, with BofA Securities forecasting $2.4 billion per quarter, while consensus estimates are at $2.1 billion [3]. - A more stable regulatory environment is expected to provide management with greater cost flexibility, which could enhance profitability [3]. - BofA's economic outlook predicts stronger GDP growth, potentially reducing credit costs in 2026, based on a projected 5.1% weighted average unemployment rate [3]. Group 4: Earnings Estimates and Valuation - BofA Securities has raised its FY26 EPS estimate from $9.85 to $10 and increased the price target from $89 to $100, suggesting a valuation of 10x 2026 P/E and 0.95x forward P/TBV, reflecting improved visibility into ROTCE [4]. - The 2026 consensus forecast assumes Citigroup will only meet the lower end of its strategic goals, indicating potential for upward revisions in future estimates [3][4].