Citigroup Earnings: Could This Time Really Be Different? Targets Look Achievable

Key Morningstar Metrics for Citigroup

• Fair Value Estimate: $104
• Morningstar Rating: ★★
• Morningstar Economic Moat Rating: None
• Morningstar Uncertainty Rating: Medium

What We Thought of Citigroup’s Earnings

Citigroup C reported fourth-quarter 2025 earnings, with investors focused on the firm’s ongoing transformation and its 2026 outlook.

Why it matters: Results were generally strong, and with management reiterating its 2026 targets for a roughly 60% efficiency ratio and returns on tangible common equity approaching 10% to 11%, we believe that it’s finally time to give the beleaguered bank credit where credit is due.

• Our prior forecast had called for an efficiency ratio of 63.3%, so the revision is financially material.
• While it’s important that investors do not conflate an excellent operating environment for banks with fundamental progress toward turning around Citi’s five core businesses, we see a clear means for management to achieve its near-term targets from here by simply rolling off portions of its transformation spending ($3.3 billion in 2025) and severance expense ($800 million) from the prior year.

The bottom line: As we increase our forecasts to align with management’s 2026 targets for 5% to 6% net interest income growth, which we view as achievable on the back of strong loan growth across the portfolio, strong deposit growth in the services business, and a 60% efficiency ratio, we’ve raised our fair value estimate for no-moat Citi to $104 from $90.

• Looking ahead, we expect the bank to generate five-year compound annual revenue growth of 3.6%, operating profit growth of 7.2%, and diluted EPS growth of 13.4%. More immediately, we expect the firm to achieve the low end of its 10% to 11% ROTCE guidance for the year to come.
• We’re impressed with CEO Jane Fraser’s efforts to simplify the business by exiting noncore markets, removing the regulatory overhang of its 2020 consent order, and investing behind efficient capital growth. Returns have improved uniformly, not just in businesses that stand to benefit from operating leverage tied to exogenous factors like trading volume or high asset prices.