Citigroup profit beats estimates as dealmaking rebounds

By Tatiana Bautzer and Prakhar Srivastava

Jan 14 (Reuters) - Citigroup C.N beat Wall Street estimates for fourth-quarter profit on Wednesday, buoyed by a rebound in dealmaking and stronger demand for services to corporate clients.

Wall Street banks benefited as mergers and acquisitions picked up late last year. Activity rebounded in the second half after tariff announcements weighed on markets in the first half and the U.S. government shutdown delayed deals.

Renewed corporate confidence and a more accommodating regulatory backdrop prompted companies to strike deals, lifting fee income for lenders advising on mergers and capital raisings.

Citigroup's investment banking fees rose 35% to $1.29 billion, up from $951 million a year earlier. Revenue in Citi's banking unit climbed 78% to $2.2 billion in the fourth quarter, and the bank posted record revenue with M&A advisory in 2025.

Citi's shares gained 65.8% in 2025, outperforming its peers and an index tracking bank stocks .BKX by a wide margin. The bank bought back $13.25 billion in stock last year, and although shares still trade at a discount to rivals, they have narrowed the gap. The bank's shares were down 3.9% in early afternoon trade.

DEALS PICK UP

Industrywide global investment banking revenue rose 15% from a year earlier to almost $103 billion, the second-highest after 2021, Dealogic data showed. Citigroup earned the fifth-highest fees across banks over the same period.

Analysts expect deal momentum to extend into the new year, helped by lower interest rates.

"The turnaround story for Citi continues under Jane Fraser as investment banking and advisory services drove the beat,” said David Wagner, head of equity and portfolio manager at Aptus Capital Advisors. "Citigroup could be officially shedding its laggard reputation."

The lender's board approved the sale of its Russian unit, AO Citibank, to Renaissance Capital last month, resulting in a pre-tax loss of about $1.2 billion, largely related to currency translation.

Citigroup's return on tangible common equity was 5.1% in the fourth quarter, far short of its 10% to 11% target for next year. Excluding the Russia loss, the return was 7.7%.

Citi last year completed the sale of a 25% stake in its Grupo Financiero Banamex to a company owned by Mexican billionaire Fernando Chico Pardo and his family.

"We are focused on the next step in the exit process (for Banamex), and we're actively looking at selling some additional smaller stakes as we lead up to an IPO," said CEO Jane Fraser on a call with analysts.

JOB CUTS

In an internal message to employees soon after the release of earnings, Fraser said the latest results, which included record revenue at all units, raised the bar for performance.

Fraser has carried out a sweeping reorganization and reduced headcount. The lender is set to cut about 1,000 jobs this week, Reuters reported. In the message to employees, Fraser said that artificial intelligence tools and automation are expected to change roles at the bank."This shift will result in some overall role reductions as our headcount continues to come down."

REGULATORY PROGRESS

Last month, the Office of the Comptroller of the Currency withdrew a 2024 amendment to Citi's 2020 consent order requiring it to improve controls and data quality.

Fraser pointed to the OCC's action as evidence that regulators are seeing "demonstrable improvement" in the bank’s safety and soundness.

"Ultimately, the timing is up to the regulators," she added.

The underlying 2020 order requires the bank to make numerous operational changes to address data management problems and implement controls to manage ongoing risks.

The clearance of the notices marks progress toward Fraser's long-running effort to fix risk and control shortcomings that have pressured the bank's profits.

TRADING SHINES IN 2025

Markets remained volatile in the fourth quarter as investors speculated about a potential bubble in artificial intelligence stocks, the Federal Reserve's interest rate path and geopolitical tensions.

Citi's total markets revenues fell 1% in the quarter to $4.54 billion, driven by fixed income and equities. Markets revenue grew 11% for the full year, compared with 2024.

Market swings often boost trading income at banks as clients reposition portfolios. Equity markets revenue was down 1% in the quarter, driven by lower cash equities.

Prime balances in the markets division jumped more than 50%, the firm said. Rapid growth in prime brokerage, the business of lending cash and securities to hedge funds to finance large trades, has emerged as a profit engine for big U.S. banks, intensifying competition for clients. Fraser has emphasized prime services as a focus for fast-growing revenue.

Net interest income, the difference between what a bank earns on loans and pays on deposits, rose 14% in the fourth quarter.

EARNINGS BEAT EXPECTATIONS

On an adjusted basis, Citi reported a profit of $1.81 per share in the fourth quarter, compared with analysts' average estimate of $1.67, according to data compiled by LSEG.

Revenue in Citi's wealth management division, a key part of Fraser's growth strategy, climbed 7% to $2.13 billion, driven by growth in Citigold and the private bank.

Expenses climbed 6% in the quarter, driven by increases in compensation and benefits, tax charges, legal expenses and technology and communication.

Rival JPMorgan Chase JPM.N beat estimates for fourth-quarter profit on Tuesday, while Bank of America BAC.N and Wells Fargo WFC.N reported higher quarterly profits.