Citigroup unveiled ambitious profitability targets for 2027-2028, aiming for 11-13% adjusted return on tangible common equity, with further growth expected by 2031. CEO Jane Fraser highlighted a company-wide overhaul and announced a $30 billion share buyback plan, signaling a focus on consistent performance and organic growth, particularly in wealth management.

US market today: Citigroup targets stronger profitability as CEO Fraser drives overhaul

Synopsis

Citigroup unveiled ambitious profitability targets for 2027-2028, aiming for 11-13% adjusted return on tangible common equity, with further growth expected by 2031. CEO Jane Fraser highlighted a company-wide overhaul and announced a $30 billion share buyback plan, signaling a focus on consistent performance and organic growth, particularly in wealth management.

Citigroup laid out stronger profitability targets for the next two years at its investor day on Thursday, as CEO Jane Fraser spearheads a company-wide overhaul to drive growth.

Six years into her tenure, Fraser is heading her second investor day to present the results of a massive reorganization that shrank Citi by selling retail businesses worldwide, eliminating management layers and increasing risk and ‌controls.

"This is a ⁠bank built ⁠both to grow and perform consistently, and that's what underpins the path to our target returns," she said.

Citi set a target range for adjusted return on tangible common equity of 11% to 13% for 2027 and 2028. That compares with its goal to achieve 10% to 11% for the current year and its 2025 return of 8.8%. The metric is an important industry figure that measures profitability on tangible assets.

For 2029 and 2031, Citi said it was expecting a return in the range of 14% to 15%. Fraser said return levels over the medium term can be achieved organically. "We have rebuilt the engine," ⁠CFO Gonzalo Luchetti ‌said.

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$30 BILLION SHARE BUYBACK PLAN

The bank also announced a multi-year $30 billion share buyback plan, expected to start in the second quarter of this year.

"The key target, ROTCE, was underwhelming in the near term but the $30 ⁠billion repurchase authorization was a clear positive," RBC analysts wrote in a note.

Citi shares rose 2.4% in afternoon trading. They have risen more than 80% since Fraser took over in March 2021and are up more than 9% so far this year, compared with a 7.5% rise in the S&P 500 index.

The bank beat Wall Street expectations for first-quarter profit last month, raking in strong revenue from its trading business and also benefiting from robust dealmaking that lifted investment banking fees.

It posted an ROTCE of 13.1% in the quarter and reported its highest quarterly revenue in a decade at $24.6 billion.

SPOTLIGHT ON WEALTH MANAGEMENT

Citi, like some of its peers on Wall Street, ‌has been increasingly focusing on wealth management, which is typically known for consistent returns, compared with the vagaries of trading.

Although the unit is much smaller than that of its rivals, Fraser has dismissed speculation of potential M&A to close the gap, saying the bank was ⁠focused solely on organic growth.

The business manages $1.3 trillion in client assets and reported ROTCE of 10.8% in the first quarter.

She also said artificial intelligence could improve results in the wealth division in the short term. The division has just released an AI initiative named Sky that will help interactions with clients.

Citi's wealth head Andy Sieg said Sky would begin rolling out in the summer to Citigold clients in the U.S., adding the firm was eager to grow the wealth business into one of the largest in the world.

"While we know that will take a while, there is no reason we can't be one of the fastest-growing wealth businesses right now," Sieg said.

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