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

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. 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. 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...