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: Citi boosts ROTCE target at investor day

Citigroup Inc. said Wednesday it expects to boost its return on average tangible common shareholder equity by focusing on medium-term revenue growth, but the stock fell as the bank warned of first-quarter revenue drop.

Laying out its objectives in its first investor day in five years, Citigroup
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said it’s targeting return on average tangible common shareholder equity (ROTCE) of 11% to 12% over the next three to five years by maintaining compounded annual revenue growth of 4% to 5% in the medium term.

The bank’s ROTCE objective is ahead of the latest Wall Street latest forecast for ROTCE of 9.2% in 2022 and 9.6% in 2023, according to a FactSet survey.

Jefferies analyst Ken Usdin said the bank’s ROTCE outlook marks a “big ramp” from its adjusted core ROTCE of about 8.5% in 2021.

For the first quarter of 2022, Citi expects a mid-single digit decline in total revenue, excluding divestiture impacts. The bank expects to book a 10% year-over-year decline in its markets unit in the first quarter. For fiscal 2022, it’s expecting low single digit growth in total revenue, excluding divestitures.

At the same time, its first-quarter growth in expense is seen increasing by 10% to 12%; also by 5% to 6% in fiscal 2022.

Shares of Citigroup fell 3.7% on Wednesday morning. The stock is down 6.9% so far in 2022, compared to a loss of 5% by the Financial Select Sector SPRD ETF
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+1.35%
.

Citi plans to focus on four equal parts of revenue growth: higher interest rates, better consumer lending, a focus on accelerated growth businesses and market share gains, Usdin said.

CEO Jane Fraser, who took the reins at the bank last year, said the bank plans to improve its business mix, invest in technology to modernize the bank and deliver overall growth, according to slides from her presentation.

Fraser is exiting the bank’s Mexico consumer, small business and middle-market banking operations, as well as its Asia consumer business in eight countries.

She’ll be focusing on boosting Citi’s global presence in other areas, growing the commercial bank and scaling up its wealth management operations overseas.

In the U.S., Citi will work to gain market share in banking, markets and personal banking.

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