Is Citigroup's Business Transformation Plan Gaining Momentum?

Core Insights - Citigroup is implementing a multi-year restructuring plan aimed at cost reduction and focusing on core operations, including plans to cut 20,000 jobs by 2026 to enhance efficiency and profitability [1][9] - The company is exiting consumer banking in 14 markets, having already exited nine, and is preparing for an IPO of its Mexican operations, which will allow for increased investment in wealth management and investment banking [2][9] Financial Performance - Wealth management revenues increased by 22% year-over-year, while investment banking revenues rose by 13% in the first half of 2025, indicating positive momentum from the restructuring efforts [3][9] - Operating expenses decreased by 1% year-over-year, while total revenues (net of interest expense) grew by 5% in the first half of 2025, showcasing effective expense management [3] Future Projections - Citigroup anticipates revenue growth at a compounded annual rate of 4-5% by the end of 2026, with expected annualized cost savings of $2-$2.5 billion [4] - The return on tangible common equity (ROTCE) is projected to reach 10-11% by 2026, up from 8.9% at the end of 2025 [4] Competitive Landscape - Competitors like Wells Fargo and Bank of America are also making strategic moves, with Wells Fargo focusing on enhancing customer experience through branch investments and Bank of America expanding its financial center network [5][6] Stock Performance and Valuation - Citigroup's shares have increased by 40.2% year-to-date, outperforming the industry growth of 26.8% [7] - The stock trades at a forward price-to-earnings (P/E) ratio of 10.74X, below the industry average of 14.81X, with earnings estimates for 2025 and 2026 indicating year-over-year rises of 27.2% and 27.9%, respectively [12][13]