Citigroup Stock Is Trading Below Its Intrinsic Value
Citigroup’s stock (NYSE: C) has lost 1% YTD, as compared to the 7% rise in the S&P500 over the same period. Further, the stock is currently trading at $45 per share, which is 21% below its fair value of $57 – Trefis’ estimate for Citigroup’s valuation. The bank posted better-than-expected results in the first quarter of 2023, with revenues increasing by 12% y-o-y to $21.45 billion. It was driven by a 23% growth in the noninterest income (NII), partially offset by a 3% decline in the noninterest revenues. While the NII benefited from interest rate hikes and loan growth, the noninterest revenues suffered due to negative growth in investment banking, sales & trading, and investment product categories. On the cost front, the provisions for credit losses increased from $755 million to $1.98 billion. Overall, the net income increased 7% y-o-y to $4.6 billion in the quarter.
The bank’s top line grew 5% y-o-y to $75.3 billion in FY 2022. It was driven by a 15% rise in the net interest income, partly offset by a 9% decline in the noninterest income. In terms of business segments, personal banking & wealth management (PBWM) revenues improved by 4% y-o-y, followed by a 3% increase in institutional client group and legacy franchise segments. Despite higher revenues, the company reported a 32% y-o-y drop in the net income to $14.8 billion, mainly because of an unfavorable build-up in the provisions figure.
Moving forward, we expect the Q2 2023 revenues to follow the same trend as Q1. All in all, we estimate Citigroup’s revenues to touch $79.6 billion in FY2023. Additionally, C’s adjusted net income is likely to remain around $11.7 billion in the year. This coupled with an annual GAAP EPS of $6.22 and a P/E multiple of just above 9x will lead to a valuation of $57.
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| Returns | May 2023 MTD [1] |
2023 YTD [1] |
2017-23 Total [2] |
| C Return | -4% | -1% | -24% |
| S&P 500 Return | -1% | 7% | 84% |
| Trefis Multi-Strategy Portfolio | -2% | 6% | 234% |
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[1] Month-to-date and year-to-date as of 5/17/2023
[2] Cumulative total returns since the end of 2016
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