Citigroup Sees ROTCE Beating Guidance as Markets, Cards and Services Gain

Key Points

• Citigroup expects full-year ROTCE to slightly exceed its 10%–11% guidance range, supported by momentum in markets, banking, services and consumer businesses. It also expects net interest income growth to reach the upper end of its 5%–6% forecast.
• Consumer activity remains resilient, with spending up about 6% year over year and stable credit trends. Services, wealth and cards are key growth areas, including 18% services net-interest-income growth and 22% ROTCE in cards during the second quarter.
• Citi plans to accelerate roughly $500 million of its previously announced three-year investment plan, while increasing share buybacks beyond last year’s approximately $13 billion. The planned Banamex deconsolidation could produce an estimated $9 billion accounting loss but is not expected to affect regulatory capital or tangible common equity cumulatively.

Citigroup NYSE: C Chief Financial Officer Gonzalo Luchetti said the bank expects full-year return on tangible common equity, or ROTCE, to finish slightly above the high end of its previously stated 10% to 11% range, citing continued momentum across its markets, banking, services and consumer businesses.

Speaking at an investor conference, Luchetti said the company was seeing strong financing activity, with capital markets broadly open for equity and debt issuance. He noted particularly active capital needs in technology and artificial intelligence, shipping and energy, while auto and consumer sectors continue to face margin pressures.

“The global economy and the U.S. economy, they both have navigated quite well so far in terms of adapting to some of the market dislocations to date,” Luchetti said, while adding that Citigroup remains attentive to geopolitical developments, AI-related disruption, inflation, rates and labor-market conditions.

Consumer spending and credit remain stable

Luchetti characterized the U.S. consumer as resilient. He said Citigroup has seen approximately 6% year-over-year spending growth, excluding the effect of its American Airlines Barclays portfolio purchase. Spending strength has been broad-based, including in travel and discretionary categories, in addition to the impact from higher gasoline prices.

Credit trends have also remained stable, according to Luchetti. He said delinquencies, losses and leading indicators have declined from a year earlier. More than 85% of Citigroup’s card portfolio is prime and above, he noted.

Citigroup continues to monitor the relationship between wage growth and inflation, as well as the direction of interest rates and the health of the labor market, Luchetti said.

Third-quarter outlook and investment plans

For the third quarter, Luchetti said Citigroup expects markets revenue to rise by mid-single digits year over year. Equity markets activity has remained strong, supported by progress in prime services and derivatives, while fixed-income, currencies and commodities performance has benefited from financing, securitization and foreign-exchange activity.

Investment-banking revenue is expected to increase by low single digits from a year earlier, with potential upside depending on transactions completed before quarter-end. Equity capital markets activity remains strong, debt capital markets are healthy but more moderate than in the first half, and mergers-and-acquisitions activity is being led by large corporate clients while sponsor activity remains more subdued, he said.

The CFO said Citigroup has not changed the financial commitments it outlined at its investor day, including plans for $5 billion in incremental business investments over three years. However, the company expects to accelerate about $500 million of those investments during the remainder of the year, weighted toward severance as well as marketing and franchise-support initiatives.

Those efforts include spending on credit-card customer acquisition and marketing for its wealth and retail businesses. Luchetti said the company expects the acceleration to help it reach return objectives more quickly while remaining within the three-year investment plan.

Citigroup now expects to be “a bit better” than its approximately 60% operating-efficiency target for the year. The company has targeted roughly 300 basis points of annual improvement in operating efficiency for three consecutive years.

Growth across services, wealth and cards

Luchetti said net interest income excluding markets is expected to land at the upper end of Citigroup’s 5% to 6% full-year growth outlook, or potentially slightly above 6%. He attributed the forecast primarily to client-driven volume growth and pricing discipline.

In the second quarter, deposits excluding markets increased 12% year over year, including 19% growth in services deposits and roughly 4% growth in wealth deposits. Loans increased 6%, led by 10% growth in services lending and approximately 5% growth in cards and wealth and banking.

Fee income excluding markets rose about 18% in the second quarter, Luchetti said. Services noninterest revenue increased 16%, including a 22% gain in assets under custody and administration and a 13% increase in cross-border activity. Wealth revenue rose 4%, though investment revenue fees increased 20%, he said.

Citigroup’s services business generated 18% growth in net interest income and 16% growth in noninterest revenue in the second quarter. Luchetti said its global network, increased client win rates and technology investments were key drivers. The bank invests about $2 billion annually in services platforms, including 24/7 U.S. dollar clearing, custody capabilities and digital-asset offerings.

In wealth, ROTCE improved from 7.6% a year earlier to 10.8% in the first quarter and 14.4% in the second quarter. Citigroup’s near-term target for the business is 15% to 20%. Second-quarter wealth revenue grew 13% while expenses rose 3%, Luchetti said, supported by 9% organic growth in net new investment assets.

The cards business posted a 22% ROTCE in the second quarter, in line with its low-20% through-the-cycle target. Luchetti said Citigroup is emphasizing general-purpose cards, which represented 84% of the card mix by midyear, up from 82% at the end of the prior year. The company’s acquisition of Kard is intended to help personalize rewards and offers across proprietary and co-branded card portfolios.

On acquisitions, Luchetti said investors should not expect a transformative transaction. Citigroup remains focused on execution and organic opportunities, though it may pursue smaller add-on acquisitions to expand capabilities.

Capital returns, Banamex and transformation

Citigroup repurchased approximately $10.3 billion of stock across the first two quarters and expects total 2026 buybacks to exceed the approximately $13 billion repurchased last year. The company has announced a new $30 billion buyback program and completed a prior program of about $20 billion, Luchetti said.

Regarding Banamex, Citigroup now owns about 51% of the Mexican business after completing the final 1.4% of a second sell-down tranche. It does not expect further transactions for the remainder of the year and expects to trigger deconsolidation early next year, once its ownership falls below 50%.

Luchetti said deconsolidation is expected to result in a currency translation adjustment flowing through the income statement as a loss of about $9 billion. He said the action should not affect regulatory capital or tangible common equity on a cumulative basis. An initial public offering could follow, depending on market conditions, timing and valuation.

The company has reached its target state for risk, compliance and control programs, Luchetti said, though work remains on its data program, particularly regulatory reporting. Citigroup has said about half of its $3.3 billion in transformation costs are temporary and will decline as individual programs are completed.

Looking beyond this year, Luchetti reiterated Citigroup’s 11% to 13% near-term ROTCE objective for 2027 and 2028, with a goal of reaching the top half of that range in 2028. Its longer-term 14% to 15% target is based on current capital rules, he said.

About Citigroup (NYSE:C)

Citigroup Inc NYSE: C is a global financial services company headquartered in New York City. Through its businesses, Citi provides banking, lending, credit card, wealth management, investment banking, securities, markets and treasury services to individuals, businesses, financial institutions and governments.

The company's operations include U.S. Personal Banking, which offers consumer banking, credit cards and lending products; Wealth Management, which serves affluent and high-net-worth clients; and its Institutional Clients Group, which provides investment banking, corporate banking, markets, securities services and transaction banking.

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