Citigroup (NYSE:C) stock has lost 28% since the start of the year, compared to a 22% drop in the S&P500 over the same period. Furthermore, the stock is currently trading at $43 per share, which is 33% below the fair value of $64 – Trefis’ estimate of Citigroup Rating. The bank reported better-than-expected results in the second quarter of 2022, with revenue increasing 11% year-over-year to $19.6 billion. It was driven by a 20% increase in the institutional client pool and a 6% improvement in personal banking and wealth management revenue, partially offset by a 15% decrease in the legacy franchise unit. The ICG division benefited from a 28% increase in the services sub-segment (Treasury, Trading and Securities Services) and a 25% growth in the sales and trading business, and was somewhat reduced by a 46% decline in investment banking revenue. Similarly, growth in PBWM was driven by a 12% increase in net interest income due to higher interest rates and outstanding loan balances. On the cost front, provisions for credit losses increased from $1.1 billion to $1.3 billion. Overall, adjusted net income decreased 27% year over year to $4.2 billion. Furthermore, the company has temporarily suspended its share buyback program.

The bank’s top streak grew 4% year-over-year to $38.8 billion in the first half of 2022. This was mainly due to higher revenue in the Services, Sales, Commerce and Credit Cards (Branded Cards and Retail) divisions. On the flip side, investment banking and wealth management posted negative growth. Overall, the NII’s total improved 9% year over year to $22.8 billion in the first two quarters, primarily due to higher interest rates.

Going forward, we expect the NII to continue its growth momentum over subsequent quarters. The consensus estimates for third-quarter revenue and earnings are $18.31 billion and $1.58, respectively. All in all, we appreciate Citigroup revenue to reach $73.3 billion in fiscal year 2022. Additionally, C’s adjusted net income margin is likely to decline from 28.9% to approximately 18.5%, resulting in adjusted net income of $13.5 billion and annual earnings per share of $6.85. This combined with a P/E of just over 9x will result in a valuation of $64.

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