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The 4Q24 earnings season is off to a good start for the banking industry after Citigroup (C) joined JPMorgan Chase (JPM) and Wells Fargo (WFC) in delivering better-than-expected earnings this morning with the company seeing revenue growth in each of its five business segments. Additionally, Citigroup, which embarked on a major transformation plan in 2024 in an effort to unlock value and drive higher returns, took a big step in achieving that goal by authorizing a new $20.0 bln stock buyback program.

Beyond its progress in carrying out its transformation initiatives, which helped lower operating expenses by 18% in Q4, Citigroup also benefitted from more benign foreign exchange impacts. In particular, a smaller impact from the devaluation of the Argentina currency provided a boost as total revenue grew by 12% yr/yr to $19.58 bln, compared to a 7% increase when excluding the effect of the devaluation. 

At the same time, the upswing in M&A activity and IPOs continued in Q4, lifting revenues for banks' investment banking arms, and Citigroup was no exception.

• On that note, Citigroup's Banking segment generated revenue growth of 27% to $1.2 bln, fueled by a 35% jump in investment banking revenue. The company saw growth across all categories -- debt capital markets, equity capital markets, and advisory -- thanks to a more conducive macroeconomic environment for deals. With the incoming Trump Administration likely taking a more lenient approach to business regulations, and with the possibility of more interest rate cuts this year, the backdrop looks pretty bright for the Banking segment in 2025.
• The star of the show, though, was Citigroup's Markets segment. Revenue soared by 36% to $4.6 bln, easily topping expectations, as the company saw strength in both fixed income and equity markets. On the fixed income side, healthy demand for rates, currencies, and spreads products drove a 37% jump in revenue to $3.5 bln, while record highs for the stock market in Q4 pushed prime balances higher by 23% and facilitated revenue growth of 34%.
• Turning to the consumer side of the business, high interest rates continue to drive credit card balances higher in the U.S. Personal Banking (USPB) segment, while Citigroup also kept a tight lid on expenses. In branded cards, revenue increased by 7% to $2.8 bln as interest-earning balances also grew by 7%, but higher net credit losses due to the elevated interest rate environment provided a headwind. Overall, net income for USPB decreased by 25% qtr/qtr to $392 mln, but on a yr/yr basis, net income was up by 95%.
• Lastly, CEO Jane Fraser stated that Citigroup entered 2025 with momentum across its business lines, which is reflected in the upside FY25 revenue guidance of $83.5-$84.5 bln. If there is a blemish, it's that Citigroup slightly lowered its return on tangible common equity (RoTCE) outlook to 10-11% by the end of next year, compared to its prior forecast of 11-12%.

The main takeaway is that a combination of company-specific (Citigroup's turnaround initiatives), macroeconomic, and industry-wide drivers underpinned a strong Q4 earnings report, propelling shares to new multi-year highs. While plenty of risks remain, including geopolitical uncertainties and stubbornly high interest rates, Citigroup's outlook for FY25 remains bright.