Skip to Content
Stock Analyst Update

A Fair-Value Uptick for Citi

Despite only marginal revenue growth, expenses were well-managed and allowed the bank's efficiency ratio and overall profitability to improve.


Narrow-moat-rated  Citigroup (C) reported solid fourth-quarter results, with net income of $4.2 billion, or $1.61 per share, on $17.1 billion of revenue. Revenue was a bit lower than the same quarter last year after normalizing for one-time effects of tax reform, but expense control was excellent, with expenses down 4%. This allowed net income to grow 14%, with EPS up 26%, aided by continued share repurchases. Citigroup repurchased roughly $18.4 billion in shares, reducing the year-end share count by 8%. The bank has now repurchased roughly 13% of the share base since investor day, and has another $9.8 billion of capital left to return to shareholders in the first and second quarters of 2019. Overall, we have been pleased with the progress Citigroup has made, and the bank is largely meeting the targets it set at its last investor day. We are increasing our fair value estimate to $80 per share from $77.

Citigroup's efforts to increase profitability continue to show results, with a return on tangible common equity of 10.9% for full-year results, up from 8.1% last year. This is on track with the bank’s updated goals, and management reiterated its goal of hitting a 12% return on tangible common equity in 2019. We are encouraged that, despite only marginal revenue growth, expenses were well-managed and actually decline year over year. This allowed the bank’s efficiency ratio and overall profitability to improve. Even in the face of a tougher trading environment and limited revenue growth for the branded card portfolio, the bank was able to manage expenses to meet its goals. This supports management’s previous assertions that while there may be some give and take along the top line, they felt the goals they set were realistic enough that they were not fully dependent on hitting aspirational growth levels. If Citigroup can continue meeting its goals throughout 2019, we believe shares offer value at today’s prices.

Morningstar Premium Members gain exclusive access to our full analyst reports, including fair value estimates, bull and bear breakdowns, and risk analyses. Not a Premium Member? Get this and other reports immediately when you try Morningstar Premium free for 14 days.

Eric Compton does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.

We’d like to share more about how we work and what drives our day-to-day business.

We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.

How we use your information depends on the product and service that you use and your relationship with us. We may use it to:

  • Verify your identity, personalize the content you receive, or create and administer your account.
  • Provide specific products and services to you, such as portfolio management or data aggregation.
  • Develop and improve features of our offerings.
  • Gear advertisements and other marketing efforts towards your interests.

To learn more about how we handle and protect your data, visit our privacy center.

Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.

To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.

Read our editorial policy to learn more about our process.