Citigroup (C) delivered a stellar performance in Q3 2025, with both revenues and profits easily beating estimates. Importantly, all five of its business segments posted record revenues in the quarter, and it showed good progress on the transformation plan under CEO Jane Fraser. Citi is outperforming large U.S. banking peers, including J.P. Morgan Chase (JPM), Wells Fargo (WFC), and Bank of America (BAC), and is up over 40% for the year.
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Citi’s outperformance is not just a 2025 thing, and it has risen about 150% over the last two years, which is well ahead of most of its peers. Along with the capital gains, Citi investors are also rewarded with a generous dividend yield of 2.4%, which is higher than many other large banks. In this article, we’ll examine whether Citi is still a good buy, beginning with a snapshot of the company’s Q3 earnings.
Banks in general posted a strong set of numbers in Q3. Talking of Citi, America’s third-biggest lender, it posted revenues of $22.1 billion, up 9% year-over-year (YoY) and ahead of the $21.09 billion analysts expected. Its adjusted earnings per share (EPS) rose 48% over the period to $2.24, while analysts were expecting the metric at $1.90. The company’s net credit losses rose 2% YoY, but total credit costs fell 8% during the period to $2.45 billion. To sum it up, it was a nice quarter for Citi, where it managed to grow its top line and bottom line while keeping delinquencies in check.
After Citi’s Q3 earnings, several brokerages raised C stock’s target price, with Morgan Stanley raising its to a Street-high of $134 while maintaining its “Overweight” rating. The firm’s new estimate implies an upside of 35% over the next 12 months.
The overall Street sentiment is reasonably bullish on Citi, and of the 24 analysts covering C stock, 12 have a “Strong Buy” rating while four rate the stock as a “Moderate Buy.” The remaining eight analysts rate C as a “Hold” or some equivalent.
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One of the key pillars of Citi’s transformation is efficient capital allocation. During the Q3 earnings call, Fraser said that “we are disciplined stewards of our shareholders’ capital, investing it where we should and returning what we don’t deploy.”
Story Continues
As part of the transformation, Citi has exited several markets, which has freed up capital and bumped up its return metrics. The company’s adjusted return on total capital employed was 9.2% in the first nine months of the year, which is now very close to the medium-term target of between 10% and 11% that the company has set. Fraser reiterated her previous views, terming the target a “waypoint, not a destination,” while adding that “we see a lot of different areas of upside.”
The company has a $20 billion buyback program, and during Q3, it spent $5 billion on share repurchases, which was $1 billion higher than what it guided for. While Citi did not give buyback guidance for the current quarter, CFO Mark Mason hinted that the company would continue prioritizing buybacks. “While we have seen good performance in the stock over the course of the year, we’re still at and around kind of one-times tangible book value, and I think there’s more upside to the stock,” said Mason during the earnings call.
Citi has been a play on the transformation and the expected normalization of its valuation multiples.
The transformation has progressed nicely, as summed up by Fraser during the Q3 earnings call: “We have been relentless in our execution, and it is creating results. Over two-thirds of our transformation programs are at or are close to our target state and we are making very good progress in the remaining areas.”
Meanwhile, Citi’s outperformance has also meant that its valuation gap with peers has narrowed. C stock now trades slightly above the tangible book value of $95.72 that it reported at the end of Q3. However, it still trades below the book value per share of $108.41. I believe the next milestone in Citi’s valuation rerating would be the stock rising to its book value, which is not an unreasonable expectation given where its peers trade.
On the dividend front, the company should continue to increase the payouts even as the priority with free cash would be to repurchase shares. Overall, while not a screaming buy as it was when it traded below its tangible book value, Citi is still a decent buy, given the still-low valuations. The dividend yield remains a cherry on top and would only add to the total returns that patient investors make from the stock.
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On the date of publication, Mohit Oberoi had a position in: C, BAC. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com
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