The stock rose as high as $90.69 on Tuesday after the third largest U.S. lender reported market-beating earnings, driven by windfalls in its trading and investment banking businesses. It was last up 3% in late afternoon trading.
The promised $4 billion share buyback in the third quarter is bigger than the $3.75 billion the bank bought back in the first half of the year.
Analysts reacted well to the results and increased shareholder return. Kenneth Leon, director of Research at CFRA, increased the target price for Citigroup by $17 to $110 per share for the next 12 months. Leon said the bank deserves to trade closer to peers as its performance is improving.
Stocks and bonds have whipsawed since April, when U.S. President Donald Trump stunned markets by announcing sweeping tariffs against major trading partners. Volatility tends to help Wall Street trading desks as clients adjust their portfolios.
Citi's markets revenue jumped 16% to $5.9 billion, its best performance since the second quarter of 2020.
Markets have rebounded and investment banking deals resumed after the initial shock of U.S. tariff announcements in April froze activity. Several large IPOs and multibillion-dollar buyouts since June have fueled optimism for the second half.
"We're very pleased on the M&A front - the pipeline is excellent," CEO Jane Fraser told analysts on a conference call, and said the bank is working on seven of the 10 largest investment banking transactions of the year. The bank has been seeing more activity in healthcare and tech, mainly in North America, and more deals coming from financial sponsors.
The third-largest U.S. lender's net income was $4 billion, or $1.96 per share, in the three months ended June 30. Analysts, on average, had expected $1.60 per share, according to estimates compiled by LSEG.
In addition to the higher revenue from trading, Citi's investment banking fees rose 13%. Investment banking growth was led by a 52% rise in M&A advisory fees. Overall banking revenue increased 19% to $1.9 billion.
Chief Financial Officer Mark Mason said the bank still sees dealmaking picking up despite tariff uncertainty ahead of an August 1 implementation date. "The equity and debt issuance markets remain constructive in light of equity evaluations and the direction of interest rates.", he said.
Equity capital markets fees climbed 25% in the quarter, driven by strength in convertibles and initial public offerings.
The banking division has grown rapidly since its leader, Viswas Raghavan, joined from JPMorgan a year ago. Citi jointly led the $1.05-billion IPO of stablecoin issuer Circle (CRCL.N) and the $650-million listing of retail trading platform eToro . The bank also advised Charter Communications (CHTR.O) on its $21.9-billion deal to buy privately held Cox Communications in May.
This quarter may mark a more lasting change for the bank, UBS analyst Erika Najarian said in a note to clients.
"Citigroup is a well-known capital return potential story, but 2Q results imply that it could be more than this, which could attract more long-term shareholders that had been reticent about owning shares."
Earlier on Tuesday, rivals JPMorgan Chase (JPM.N) and Wells Fargo (WFC.N) beat Wall Street estimates for second-quarter profit.
CONSENT ORDERS PROGRESS
Fraser said the bank is making progress on complying with regulatory punishments, known as consent orders, requiring it to improve controls and data quality.
In a presentation to analysts, Citi announced that it has retired 211 applications in the first half of the year and enhanced controls in 85 countries to detect "large, anomalous payments."
The bank was hit by the consent orders in 2020 after it erroneously sent $900 million to Revlon lenders.
Citi shares have been slowly narrowing the gap with Wall Street peers, but are still traded below book value. They have 17 buy recommendations and five hold recommendations from analysts, according to data compiled by LSEG.
Citi shares have risen 24.3% year to date, compared with a 6.6% gain in the S&P 500 (.SPX) through Monday.
The bank is on track to carry out an IPO of its Mexican unit Banamex by year-end, Fraser said.
Citi's global revenue rose 8% in the quarter from a year earlier to $21.7 billion, notching second-quarter records for its services, wealth, and U.S. personal banking businesses.
Revenue in the wealth unit, singled out by Fraser as a key growth area, was up 20% in the quarter. U.S. personal banking revenues climbed 6% in the second quarter, driven by higher interest-earning balances on credit cards. Most of the credit losses this quarter, of $2.2 billion, were related to the credit card portfolio.
The bank built around $600 million as an allowance for credit losses to address some downgrades in the corporate lending portfolio and some transfer risk of dividends in Russia belonging to clients.
