Citigroup Shares Fall 3% as Profit Declines 26% in Q4 on Higher Expenses

Citigroup shares fell nearly 3% on Friday after the New York City-based investment bank said its profit slumped 26% in the fourth quarter, largely due to reflecting higher expenses, partially offset by higher revenues and lower cost of credit.

The investment bank reported quarterly adjusted earnings of $1.46​​ per share, beating the Wall Street consensus estimates of $1.38 per share. The company said revenue rose 3.1% to $17.02 billion from a year ago. That too beat the market expectations of $16.75 billion.

Net income of $3.2 billion decreased 26% from the prior-year period, reflecting higher expenses, partially offset by higher revenues and lower cost of credit.

Following this, Citigroup stock slumped nearly 3% to $65.86 on Friday. The stock rose over 12% so far this year after falling more than 2% in 2021.

Moreover, JPMorgan shares also slumped over 4% in pre-market trading on Friday after the leading global financial services firm said a slowdown in its trading arm caused its profits to decline by 14% in the fourth quarter.

For the full year 2021, Citigroup reported a net income of $22.0 billion on revenues of $71.9 billion, compared to net income of $11.0 billion on revenues of $75.5 billion for the full year 2020.

Analyst Comments

“While the stock is cheap at 0.6x NTM BVPS, and new CEO is taking strong, proactive strategic action to boost returns closer to peers, we believe these actions will take time to play out,” noted Betsy Graseck, equity analyst at Morgan Stanley.

Citi is exiting 13 consumer businesses in Asia and EMEA, and focusing on higher-growth areas of US consumer, Asia WM, International wholesale and consumer payments. These actions could drive ROE higher than the 9% we are modelling for 2023, but we expect the stock will only start to fully reflect this once revenues begin to accelerate. Citi benefits less than peers from higher rates, and we expect some of our more rate sensitive stocks will outperform as the Fed begins to raise rates next year.”

Citigroup Stock Price Forecast

Fifteen analysts who offered stock ratings for Citigroup in the last three months forecast the average price in 12 months of $78.56 with a high forecast of $120.00 and a low forecast of $64.00.

The average price target represents an 18.30% change from the last price of $66.41. From those 15 analysts, eight rated “Buy”, seven rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $82 with a high of $111 under a bull scenario and $53 under the worst-case scenario. The firm gave an “Equal-weight” rating on the investment bank’s stock.

Several other analysts have also updated their stock outlook. Jefferies cut the target price to $80 from $87. JPMorgan slashed the target price to $76 from $80.5. Piper Sandler lowered the target price to $88 from $94. Evercore ISI cut the target price to $64 from $74.

Technical analysis also suggests it is good to sell as 100-day Moving Average and 100-200-day MACD Oscillator signals a strong selling opportunity.

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