Citigroup Surpasses Profit Expectations Amid Resurgence in Dealmaking

Citigroup's Financial Performance Overview

By Tatiana Bautzer and Prakhar Srivastava

Investment Banking and Dealmaking

Jan 14 (Reuters) - Citigroup beat Wall Street estimates for fourth-quarter profit on Wednesday, buoyed by a rebound in dealmaking and stronger demand for services to corporate clients.

Market Revenue Insights

Wall Street banks benefited as M&A picked up late last year. Activity rebounded in the second half after tariff announcements weighed on markets in the first half and the U.S. government shutdown delayed deals. 

Wealth Management Growth

Renewed corporate confidence and a more accommodating regulatory backdrop prompted companies to strike deals, lifting fee income for lenders advising on mergers and capital raisings.

Challenges and Future Outlook

Citigroup's investment banking fees rose 35% to $1.29 billion, up from $951 million a year earlier.

Its shares were up 1.3% in premarket trading after the results.

Citigroup's return on tangible common equity was 5.1% in the fourth quarter, far short of its 10% to 11% target for next year. Excluding the Russia loss, the return was 7.7%. 

The lender's board approved the sale of its Russian unit, AO Citibank, to Renaissance Capital last month, resulting in a pre-tax loss of about $1.2 billion largely related to currency translation.

"With record revenues and positive operating leverage for each of our five businesses, 2025 was a year of significant progress as we demonstrated that the investments we are making are driving strong top-line growth," said CEO Jane Fraser in a statement. 

Industrywide global investment banking revenue rose 15% from a year earlier to almost $103 billion, the second-highest after 2021, Dealogic data showed. Citigroup earned the fifth highest fees across banks over the same period.  

Analysts expect deal momentum to extend into the new year, helped by lower interest rates and a more accommodating regulatory backdrop.

Revenue in Citi's banking unit climbed 78% to $2.2 billion in the fourth quarter, and the bank posted a record M&A performance in 2025.  

TRADING SHINES IN 2025

Markets remained volatile in the fourth quarter as investors speculated about a potential bubble in artificial intelligence stocks, the Federal Reserve's interest rate path and geopolitical tensions.

Citi's total markets revenues fell 1% in the quarter to $4.54 billion, driven by fixed income and equities. Markets revenue grew 11% for the full year, compared with 2024.

Market swings often boost trading income at banks as clients reposition portfolios.

Meanwhile, net interest income, the difference between what a bank earns on loans and pays out on deposits, rose 14% in the fourth quarter.  

While lower interest rates can weigh on net interest income, they can also spur demand from borrowers.

Equity markets revenue was down 1% in the quarter, driven by lower cash equities.

Prime balances in the markets division jumped more than 50%, the firm said. 

Rapid growth in prime brokerage, the business of lending cash and securities to hedge funds to finance large trades, has emerged as a profit engine for big U.S. banks, intensifying competition for clients. Fraser has emphasized prime services as a focus for fast-growing revenue.

Revenue in Citi's wealth management division, a key part of Fraser's growth strategy, climbed 7% to $2.13 billion, driven by growth in Citigold and the private bank.

Citi's shares gained 65.8% in 2025, outperforming its peers, and an index tracking bank stocks by a wide margin. The bank has bought back $13.25 billion in stock last year and although shares still trade at a discount to rivals, they have narrowed the gap.

Expenses climbed 6% in the quarter, driven by increases in compensation and benefits, tax charges, legal expenses and technology and communication.

Fraser carried out a sweeping reorganization and reduced headcount. The lender is set to cut about 1,000 jobs this week, a source familiar with the matter said on Monday.

Rival JPMorgan Chase beat estimates for fourth-quarter profit on Tuesday, while Bank of America and Wells Fargo reported higher quarterly profits.

Citi's total revenue rose to $19.87 billion in the fourth quarter, compared with $19.47 billion a year earlier. 

Earnings slid to $2.47 billion, or $1.19 per share, in the three months ended December 31, the third-largest U.S. lender reported on Wednesday. That compared with $2.9 billion, or $1.34 per share, a year earlier.

On an adjusted basis, Citi reported a profit of $1.81 per share in the fourth quarter, compared with analysts' average estimate of $1.67, according to data compiled by LSEG. 

(Reporting by Prakhar Srivastava in Bengaluru and and Tatiana Bautzer in New York; Editing by Lananh Nguyen and Devika Syamnath)