Citigroup Released Q2 2022 Financial Report and Key Metrics on Friday

The Bank manages assets (AUM) with a total value of more than $2 trillion. Citigroup (C) is the primary dealer of US Treasury securities. Since 2011, it has been one of the globally systemically important banks. The corporation includes dozens of divisions. Number of employees: more than 210,000 people.

Quarterly revenue rose 12% against a drop in closest competitors and amounted to $19.6 billion, while analysts expected $18.4. Net earnings per share fell 23% to $2.2 against the consensus of $1.65 (a positive difference of more than 30%). The bank earned $4.5 billion, of which it set aside $1.3 billion in loan loss reserves.

It was the best quarter for Citi's foreign exchange division in 10 years, with revenue growth of 33% YoY. Citigroup’s Q2 net credit losses of $850 million decreased from $872 million in Q1 and, especially, $1.32 billion in Q2 2021. Net allowance credit build of $375 million compares with a release of $138 million in Q1 and a release of $2.40 billion in Q2 2021. Total cost of credit was $1.27 billion in Q2 vs. $755 million in Q1 and a benefit of $1.07 billion in the year-ago quarter.

Institutional Clients Group revenue of $11.4 billion rose 2% QoQ and 20% YoY. Personal Banking and Wealth Management revenue of $6.03 billion increased 2% QoQ and 8% YoY.

The estimate of potential losses in Russia has been reduced from $3 billion to $2 billion, while the amount of all assets in the Russian Federation has exceeded $8 billion, largely due to the extreme rally of the USDRUB exchange rate. The financial group returned $1.3 billion to shareholders of common stock in the form of dividends and share buybacks.

Important: Citigroup is currently required to increase own capital as per recently conducted stress test. As a result, just like in the case of JP Morgan Chase (JPM), it paused share buybacks. This is extremely unfortunate as Citi is now only trading at ~0.6x tangible book value being apparently deeply undervalued. YTD, Citi has delivered a ROEC of 10.8%, so it effectively trades at a P/E of ~5. However, by 2023, Citi is likely to find itself with excess capital that could be deployed towards share buybacks again.

Conclusion: Citigroup again, like the previous five quarters, exceeded expectations on both revenue and earnings, and outperformed competitors. The bank’s performance was largely driven by currency hedge transactions and commodity trading. Stocks posted their most powerful intraday move in more than two years on Friday. Analysts are forecasting the stock to rise to $53.5.