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CITIGROUP INC 10-K Analysis & Summary – 2/21/2025

⚠️This is not investment advice.

⚠️ This is an experimental project and this report is for informational purposes only and should not be considered investment advice. Conduct your own thorough research and consult with a qualified financial advisor before making any investment decisions. ⚠️

Citigroup, Inc.

Filing date:

02/21/2025

TLDR:

Citigroup’s 2024 Form 10-K shows positive operating leverage and revenue growth. The company is making progress on strategic transformation and returning capital to shareholders, but faces macroeconomic, regulatory, and cybersecurity risks.

ELI5:

Citigroup, a big bank, made more money this year because they increased revenue and managed expenses well. They’re also working on changing how the company is structured, but they have to be careful about the economy, new rules, and hackers.

Accession #:

0000831001-25-000067

Published on

Analyst Summary

  • Net income increased by 37% to $12.7 billion.
  • Revenues increased by 3% to $81.1 billion.
  • Positive operating leverage of 764 bps.
  • Return on Average Assets: 0.51%.
  • Return on Average Common Stockholders’ Equity: 6.1%.
  • Basic Earnings Per Share (EPS): $6.03.
  • Diluted Earnings Per Share (EPS): $5.94.
  • CET1 Capital Ratio: 13.63%.
  • Efficiency Ratio: 66.5%.
  • Revenue Growth: 3.41%.
  • Net Income Growth: 37.43%.
  • EPS Growth: 48.16%.

Opportunities and Risks

  • Macroeconomic Risks: Potential impacts from inflation, interest rate changes, and geopolitical events.
  • Strategic Risks: Risks related to regulatory capital requirements, the CCAR process, and the ability to utilize deferred tax assets.
  • Operational Risks: Increasing cybersecurity threats and the potential for operational failures.
  • Compliance Risks: Heightened regulatory scrutiny and the need to comply with complex and evolving regulations.

Potential Implications

Company Performance

  • Transformation efforts and capital management strategies will be critical to future success.
  • Continued progress on strategic priorities, including organizational simplification and divestitures.

Citigroup Inc. – Form 10-K Analysis (Fiscal Year 2024)

Executive Summary

This report analyzes Citigroup Inc.’s Form 10-K filing for the fiscal year 2024. Key findings include positive operating leverage driven by revenue growth and expense management, continued progress on strategic transformation, and capital returned to shareholders. The report also identifies risks related to macroeconomic conditions, regulatory changes, and cybersecurity.

Company Overview

Citigroup Inc. is a global diversified financial services holding company providing a range of financial products and services to consumers, corporations, governments, and institutions. The company operates in nearly 160 countries and jurisdictions.

Detailed Analysis

Financial Performance

Citigroup reported net income of $12.7 billion, a 37% increase compared to the previous year. Revenues increased by 3% to $81.1 billion, driven by non-interest revenue growth. The effective tax rate decreased to 25%.

Key Ratios and Trends

  • Return on Average Assets: 0.51%
  • Return on Average Common Stockholders’ Equity: 6.1%
  • Operating Leverage: Positive 764 bps

Segment Analysis

The report provides a breakdown of performance by operating segment:

  • Services: Revenue increased by 9%, driven by non-interest revenue.
  • Markets: Revenue increased by 6%, with strong performance in Equity Markets.
  • Banking: Revenue increased by 32%, driven by Investment Banking and Corporate Lending.
  • Wealth: Revenue increased by 7%, driven by higher non-interest revenue.
  • U.S. Personal Banking: Revenue increased by 6%, driven by higher net interest income.

Management’s Discussion and Analysis (MD&A)

Management highlights progress on strategic priorities, including organizational simplification and divestitures. The report also discusses the ongoing transformation efforts and the impact of regulatory consent orders.

Risk Assessment

The report identifies several key risks:

  • Macroeconomic Risks: Potential impacts from inflation, interest rate changes, and geopolitical events.
  • Strategic Risks: Risks related to regulatory capital requirements, the CCAR process, and the ability to utilize deferred tax assets.
  • Operational Risks: Increasing cybersecurity threats and the potential for operational failures.
  • Compliance Risks: Heightened regulatory scrutiny and the need to comply with complex and evolving regulations.

Uncommon Metrics

The report includes disclosures on metrics such as:

  • Financing Receivables 30-89 Days Past Due
  • Financing Receivables Equal to or Greater Than 90 Days Past Due
  • Fair Value Measurements at Net Asset Value per Share

Pension and Postretirement Benefit Plans

The report provides detailed information on the company’s pension and postretirement benefit plans, including plan assets, obligations, and contributions.

Conclusion & Actionable Insights

Citigroup’s 2024 performance reflects a positive trajectory, driven by revenue growth and improved efficiency. However, investors should carefully monitor the identified risks, particularly those related to macroeconomic conditions and regulatory compliance. The company’s transformation efforts and capital management strategies will be critical to its future success.

Financial Ratio and Metric Analysis

Profitability

  • Gross Profit Margin: Not applicable for financial institutions.
  • Operating Profit Margin:

    • Ratio/Metric: $17,046 / $81,139 = 21.01%
    • Trend: (21.01% – 16.45%) / 16.45% = 27.72%
    • Industry: Compared to the banking industry, this is a good operating margin.
  • Net Profit Margin:

    • Ratio/Metric: $12,682 / $81,139 = 15.63%
    • Trend: (15.63% – 11.76%) / 11.76% = 32.89%
    • Industry: Compared to the banking industry, this is a good net profit margin.
  • Return on Assets (ROA):

    • Ratio/Metric: 0.51% (provided)
    • Trend: (0.51% – 0.38%) / 0.38% = 34.21%
    • Industry: The ROA is low compared to the industry average.
  • Return on Equity (ROE):

    • Ratio/Metric: 6.1% (provided)
    • Trend: (6.1% – 4.3%) / 4.3% = 41.86%
    • Industry: The ROE is low compared to the industry average.
  • Earnings Per Share (EPS) – Basic:

    • Ratio/Metric: $6.03 (provided)
    • Trend: ($6.03 – $4.07) / $4.07 = 48.16%
    • Industry: The EPS is good compared to the industry average.
  • Earnings Per Share (EPS) – Diluted:

    • Ratio/Metric: $5.94 (provided)
    • Trend: ($5.94 – $4.04) / $4.04 = 47.03%
    • Industry: The EPS is good compared to the industry average.

Liquidity

  • Current Ratio:

    • Ratio/Metric: Not directly calculable from the provided data.
    • Industry: A current ratio of 1 or higher is generally considered healthy.
  • Quick Ratio (Acid-Test Ratio):

    • Ratio/Metric: Not directly calculable from the provided data.
    • Industry: A quick ratio of around 1 is generally considered healthy.
  • Cash Ratio:

    • Ratio/Metric: $276,532 / $1,284,458 = 0.22
    • Industry: A cash ratio of 0.22 is generally considered low.

Solvency/Leverage

  • Debt-to-Equity Ratio:

    • Ratio/Metric: $287,300 / $208,598 = 1.38
    • Trend: (1.38 – 1.39) / 1.39 = -0.72%
    • Industry: A debt-to-equity ratio of 1.38 is generally considered moderate.
  • Debt-to-Assets Ratio:

    • Ratio/Metric: $287,300 / $2,352,945 = 0.12
    • Trend: (0.12 – 0.12) / 0.12 = 0%
    • Industry: A debt-to-assets ratio of 0.12 is generally considered low.
  • Interest Coverage Ratio (Times Interest Earned):

    • Ratio/Metric: $17,046 / $89,618 = 0.19
    • Trend: (0.19 – 0.16) / 0.16 = 18.75%
    • Industry: An interest coverage ratio of 0.19 is generally considered very low.

Activity/Efficiency

  • Inventory Turnover: Not applicable for financial institutions.
  • Days Sales Outstanding (DSO): Not directly applicable, as revenue is not solely from sales.
  • Days Payable Outstanding (DPO): Not directly applicable, as expenses are not solely related to purchases.
  • Asset Turnover:

    • Ratio/Metric: $81,139 / $2,468,431 = 0.033
    • Trend: (0.033 – 0.032) / 0.032 = 3.13%
    • Industry: An asset turnover ratio of 0.033 is generally considered low.

Valuation

  • Price-to-Earnings Ratio (P/E):

    • Ratio/Metric: $79.65 / $6.03 = 13.21
    • Industry: A P/E ratio of 13.21 is generally considered moderate.
  • Price-to-Book Ratio (P/B):

    • Ratio/Metric: $79.65 / $101.62 = 0.78
    • Industry: A P/B ratio of 0.78 is generally considered low.
  • Price-to-Sales Ratio (P/S):

    • Ratio/Metric: ($79.65 * 1,877,100,000) / $81,139,000,000 = 1.84
    • Industry: A P/S ratio of 1.84 is generally considered moderate.
  • Enterprise Value to EBITDA (EV/EBITDA):

    • Ratio/Metric: Not directly calculable from the provided data.

Growth Rates

  • Revenue Growth:

    • Ratio/Metric: ($81,139 – $78,462) / $78,462 = 3.41%
    • Industry: Compared to the banking industry, this is a good revenue growth.
  • Net Income Growth:

    • Ratio/Metric: ($12,682 – $9,228) / $9,228 = 37.43%
    • Industry: Compared to the banking industry, this is a good net income growth.
  • EPS Growth:

    • Ratio/Metric: ($6.03 – $4.07) / $4.07 = 48.16%
    • Industry: Compared to the banking industry, this is a good EPS growth.

Other Relevant Metrics

  • CET1 Capital Ratio:

    • Ratio/Metric: 13.63% (provided)
    • Trend: (13.63% – 13.37%) / 13.37% = 1.94%
    • Industry: This is a strong CET1 ratio, indicating a solid capital
      buffer.
  • Efficiency Ratio:

    • Ratio/Metric: 66.5% (provided)
    • Trend: (66.5% – 71.8%) / 71.8% = -7.38%
    • Industry: This is a good efficiency ratio, indicating good cost control.

Commentary

Citigroup’s financial performance in 2024 shows a mixed picture. While
profitability metrics like operating and net profit margins, along with EPS,
demonstrated strong positive trends, the ROA and ROE remain relatively low.
The company maintains a solid capital position with a strong CET1 ratio and
improved efficiency ratio. However, the low interest coverage ratio raises
concerns about its ability to cover interest expenses.

⚠️ This is an experimental project and this report is for informational purposes only and should not be considered investment advice. Conduct your own thorough research and consult with a qualified financial advisor before making any investment decisions. ⚠️