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Citigroup: How Did the Banking Giant Perform in Q4 of 2021?

Citigroup shares declined after its revenue and earnings in Q4 of 2021 surpassed estimates. Are investors worried about rising expenses?

The earnings season has begun, and Wall Street’s financial heavyweights reported their Q4 results last Friday. These earnings reports will allow investors to look at the key trends and drivers impacting the particular industry.

Let’s see what impacted Citigroup’s (NYSE: C) financials in Q4 and if the large-cap stock should be on your shopping list right now.

Citigroup reported earnings of $1.46 per share in Q4

Citigroup reported revenue of $17.02 billion and adjusted earnings of $1.46 per share in Q4 of 2021. Comparatively, Wall Street forecast revenue of $16.77 billion and earnings of $1.37 per share in the quarter ended in December. Further, the banking giant reported revenue of $16.5 billion and earnings of $2.08 per share in the year-ago period.

While the company beat analyst sales and earnings estimates, the stock fell by 1.25% on January 14, 2022. Investors were worried about Citigroup’s decline in net income that declined by 26% year over year to $3.2 billion. Citigroup attributed the decline to rising operating expenses and a pre-tax impact of $1.2 billion related to the sale of Asia’s consumer banking business. Citigroup sales were up 3.1% in Q4, but operating expenses grew by 18% to $13.5 billion.

The Consumer Banking business saw a top-line decline by 6% in Q4, while revenue from institutional clients rose by 4% to almost $10 billion. Citigroup’s investment banking sales soared by 18%, and fixed income revenue declined by 20% in Q4.

In 2021, Citigroup’s revenue fell by 5% to $71.88 billion, but net income almost doubled to $21.95 billion.

Citigroup exits multiple markets

Citigroup’s CEO, Jane Fraser, has focused on improving the bank’s returns over the past year. To achieve its goals, Citigroup has exited several markets in the past that include 13 retail markets in Europe and Asia and the recently announced exit from Mexico and South Korea.

Citigroup will sell its retail businesses in Southeast Asian markets, including Thailand, Indonesia, Malaysia, and Vietnam, to Singapore-based United Overseas Bank (UOB) as part of this strategy program.

According to the deal, UOB will purchase the secured and unsecured lending portfolio of Citigroup, in addition to the latter’s wealth management and retail deposit verticals.

What next for investors?

After adjusting for dividends, Citigroup stock has returned 153% to investors in the last decade. Comparatively, the S&P 500 has surged higher by 337% since January 2012. While Citigroup has grossly underperformed the broader markets in the previous 10 years, investors should also note that the stock is significantly undervalued.

It’s valued at less than 2x sales, and a price to 2022 earnings multiple of just 8.6x given its earnings are forecast to touch $7.76 per share in 2022. The company also offers investors a forward yield of 3% making it attractive to income investors as well.

Analysts tracking the stock have a 12-month average price target of $80.47, which is 20% higher than its current price.

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