Citibank: Back Then Didn't Want Me, Now I'm Hot, They All On Me

What if I told you in 2023 that a bank doing $4.00 a share in earnings, a 5.5% ROTCE, and trading at 58% of TBV would today be doing closer to $2.00 a quarter in EPS, trade at 96% of TBV, and be on the path to an 11% ROTCE and even more upside?

You’d probably have mocked me. And well, to be fair, I did tell a lot of you this and a lot of you did mock me. But here we are.

Not long ago, Citi felt like an absolute cluster you know what. A patchwork quilt stitched together by former empires, consent orders, half-repaired systems, and CEOs whose capital allocation strategy was “while the music is playing you have to dance”. Were they large? Yes. Were they profitable? No. Did everyone love to make fun of them? Absolutely.

I still recall doing a poll in the fall of 2023, and asking people what they thought of Citibank and the responses were amazing. Funny. Witty. And all relaying some version of “if I bought that one, I’d have to kick my own …”. And that right there was enough to get me digging into it.

The thesis back then for me was simple. Citibank, long the laughing stock of the bank universe, had a crown jewel services business, a bloated expense base, and a CEO in Jane Fraser that was either 3 or 4 years into her tenure and having overseen a pretty objective trainwreck. My core thesis was, Jane wants to keep her job and that what was needed was both unbelievably hard and simple on paper. Collapse reporting, tighten operations, reduce bloat, jumpstart wealth, and take this from train wreck into respectable path forward. And do it for a massive globally connected bank.

But this quarter, this quarter changed things big time. And it has a big impact on what it means for Citi going forward.

Why?

Because after a herculean effort to right the ship, this was the quarter where Citi’s five core engines finally moved in sync. Services delivered elite returns. Markets put up strong numbers. Wealth surprisingly grew. Consumer credit stabilized. And for the first time in years, Citi didn’t just post decent numbers. It actually told a coherent story, one with flow, discipline, and forward motion. Kudos to Citibank and the whole team, but really kudos to Jane Fraser. You and the team deserve all the success you’re getting.

The sharps have always known that buried under the Gordian Knot of operational complexity under Citibank’s hood, lied their crown jewel, Treasury and Trade Solutions within Services. This business though is no longer a hidden gem, it is pure moat worthy returns made by fusing compliance-grade payments infrastructure across the globe with a new world tokenized liquidity system. In Q2 services revenues grew 8% YoY to over $5.1b with net income coming in at $1.4b. Fee revenue was up, cross border transaction volume was up and total services AUC (assets under custody) hit $28t with a T. Put this all together and the business put up a quarterly 23.3% ROTCE. All by letting Fortune 100 treasurers move funds across time zones, in seconds, without worrying about cutoffs or clearing windows. Stablecoin this crypto fans.

Zooming out, the Services business line ties up about 15% of the firm’s capital and produced almost 40% of Q2 earnings. Stunning.

Markets also has some momentum behind it and this quarter proved it. Fixed income did what it does, $4.3b in revenue, up 20% YoY, with Rates and Currencies jumping 27% on client hedging and flow monetization. But the real shift came from Equities where prime brokerage balances grew 27%. Equity revenues climbed 6%, or over 35% if you back out last year’s Visa B one-off. Total Markets revenue hit $5.9b, and the franchise delivered $1.7b in net income at a 13.8% ROTCE. Not all-time highs, but clean, broad-based, strong performance.

In Wealth, Andy Sieg was brought over in 2023 from Merrill to turn around the lagging business line. And today it seems like that wealth platform Citi dreamed about in strategy decks is finally showing up in the earnings line. Revenues climbed 20% to $2.2b. Net interest income jumped 22%, lifted by higher deposit spreads. Non-interest revenue rose 17%, thanks in part to an $80m gain from the sale of its alternatives platform to iCapital, but the real driver was recurring investment fees, up alongside a 17% lift in client investment assets to $635b. Total client balances crossed $1.1t. Pretax margins hit 29%. The business earned $494m on a 16.1% ROTCE, nearly triple last year’s return.

Banking is the one business line that’s lagging. It put up a 9% ROTCE this quarter on $463m in net income. Revenues were up 18% YoY at $1.9b lifted by a 30% lift in Corporate Lending and a 15% bump in Investment Banking. Advisory fees were up off tough comps. Debt underwriting was a laggard off a strong comp and expenses were up a touch.

U.S. Personal Banking was a little better. It put up an 11.1% ROTCE off $5.1b in revenues, $2.4b in expenses and $1.9b in credit costs. Credit continues to normalize, but in Citi’s case, that’s bullish. Net credit losses in cards fell 2% to $1.8b. The 90+ day delinquency rate dropped to 1.4% and they now expect full-year loss rates of 4% on branded cards and up to 6.2% for Retail Services, both improved from earlier guidance but still high. So the consumer for Citi hasn’t fallen off a cliff and for what it’s worth they’re over-reserved: 85% of card borrowers have FICO scores above 660, and loan-loss reserves still cover 8% of the portfolio. The guide forward was for improved credit in 2H too.

The “All Other” stranded businesses and costs came in at a loss of $567m on the quarter which was down 41% YoY.

They guided for roughly $53.4b in expenses through the rest of 2025, flat with last year. Stranded costs have come down by $3b already, with $1.2b more to go. Divestitures are nearly done. And as we talked about above, revenues are growing and so the unicorn known as “Operating Leverage” is real for Jane & Mason. Their efficiency ratio improved by 340bps year over year to 63%. And then there is the capital return program. Citi’s CET1 ratio is 13.5%, well above the 12.1% regulatory minimum. The dividend is up to $0.60 per share, and buybacks are so back: they repurchased $2b in Q2 and expect at least $4b more in Q3.

EPS came in at $1.96 which was up 29% in the quarter beating expectations of the low to mid $1.70s. Revenue growth, expense discipline, plus buybacks appear to be some kind of magic formula. And this number happened despite a $333m Russia reserve build that knocked about $0.15 off EPS. Strip that out and this was a blow out?

But just to keep myself sane, keep in mind Citi only earned a 8.7% ROTCE. Banking is still underperforming and the consent orders aren’t gone yet. But the trajectory does feel much better here. Dare I say, achievable to hit a 11% ROTCE. A little bit of revenue growth, continued cost discipline, and more buybacks, and you get there. And if they hit an 11% ROTCE they are worth more than TBV. Maybe 120%? Who knows.

And on top of this, I’d like to hit one point hard, Citi is actually tech forward.

In just the first six months of 2025, the bank retired 211 legacy applications and replaced them with systems designed to move real value, in real time, across borders. It deployed anomaly-detection AI across 85 countries, scanning over 3 million transactions daily for risk signals embedded in flow behavior. Its generative AI tools have already completed 740,000 automated code reviews, saving 100,000 developer hours every week and compressing development cycles from quarters to weeks.

And they’re not just sitting around theorizing about 24/7 frictionless payments for real companies. They’re actually moving real money. Citi Token Services is fully live right now, and it is the institutional settlement layer that quietly redefines what stablecoins were supposed to be. Fully live in the U.S., U.K., Singapore, and Hong Kong, it has already processed billions in tokenized deposit transfers, programmable, instant, and always-on. Clients are sweeping liquidity between hubs like London and New York in seconds without SWIFT delays, without cutoff windows, without public blockchain volatility. Just real money, moving 24/7, inside a regulated system that knows how to reconcile at the edge and clear at the core. They offer the same speed, the same interoperability, the same programmable finality as stablecoins offer, but with bank-grade compliance, embedded auditability, and legal certainty. Jane Fraser laid it out plainly: clients want multi-asset, multi-bank, cross-border, always-on payments, and they want the accounting, AML, and reporting built in. Citi is delivering that today. And it’s not theoretical.

I’ve been long Citi since October 2023, when the world couldn’t dump it fast enough. Back then, it traded like a busted relic, bloated with stranded costs, buried under consent orders, and dismissed by anyone who wanted momentum. But I didn’t buy it for momentum. I bought it because underneath the noise was a global payments moat, a capital-light and high ROTCE engine inside Treasury and Trade Solutions, and a CEO with 3 or 4 years under her belt of abysmal returns. Turns out I was right that Jane wanted to do some stuff to keep her job.

And the thesis going forward?

Objects in motion tend to stay in motion. Services is compounding, wealth is contributing, credit is stable. If you bake in some moderate growth, banking improves, and costs stay contained … and they keep layering in billions of buybacks … you get close to the 11% ROTCE they’ve guided for in 2026. And if Citi earns 11% on TBV, it’s not worth tangible book anymore (which is around $94 right now). It’s worth more. 120%? 130%? Who knows the exact number, but I do know as things turn the good old fashioned Soros style reflexivity kicks in and price leads fundamentals. That will be fun times. It’s always fun watching a turn around story.

The best is ahead,

Victaurs

PS - to Jane Fraser once more congratulations. You did a phenomenal job. Heroic even. I wish you continued success. And also a thank you if you’re reading this to Mike Mayo for being more bullish than me all along. You make bank analysis cool … okay well cool-er than it otherwise would be.