🏦 Citigroup Reaches New Heights! 28% Rise in 2024

Citibank just smashed its Q3 2024 earnings expectations, reporting a stellar EPS of $1.51, beating Wall Street’s prediction by $0.20, and pulling in a hefty $20.32 billion in revenue, ahead of the $19.86 billion forecast. At first, the stock surged 2.5% in post-earnings trading, and it felt like a victory lap for Citibank and CEO Jane Fraser, who’s been spearheading the bank’s ongoing restructuring efforts.

But here’s the part that stings—by the end of the day, the stock gave back all those gains and then some. What was looking like a strong rally fizzled out, and the stock closed lower. If you’re an investor, this kind of volatility can be stomach-churning. It’s like the market handed you a gift and then ripped it away before you could unwrap it.

So, Why Did the Stock Spike Then Crash?

The initial rally made sense—Citibank’s institutional business is thriving, thanks to solid demand for cross-border payments and their Mastercard partnership. Revenue is growing, consumers are still swiping their credit cards, and the restructuring is finally paying off by cutting costs and making the bank more efficient​.

But the end-of-day drop is where things get interesting. Investors started to remember that Citibank isn’t out of the woods yet. Sure, their earnings were great, but the broader economic picture is starting to make investors sweat.

Here’s What Investors Are Freaking Out About: The Fed’s Rate Cuts

Let’s talk about the Fed’s recent aggressive rate cuts. After four years of jacking up interest rates to fight inflation, the Federal Reserve pulled the trigger in September 2024 with a 0.50% cut—the first of what’s expected to be a series of cuts in the next year​.

And here’s where it gets tricky for Citibank. Lower interest rates are a double-edged sword for banks. On one hand, it makes loans cheaper, which can increase loan demand—good for business, right? But on the other hand, lower rates compress net interest margins (the difference between what the bank earns on loans and pays on deposits), which has been a key driver of Citibank’s earnings growth recently.

So, while Citibank might see more people borrowing, it’s going to make less on each loan, which could squeeze profits going forward. Investors know this, and that’s why the stock dipped after the initial excitement wore off.

Citibank’s Volatility—Strap In, It’s Gonna Be a Bumpy Ride

If you’re holding Citibank stock, you’ve probably noticed—it’s wildly volatile. With a beta of 1.5, this stock swings faster than the broader market​. In plain terms, when the market moves, Citibank moves even more. So if you’re looking for a smooth ride, this isn’t it.

The recent stock performance illustrates this perfectly. You get a big earnings beat, the stock jumps, and then in the blink of an eye, it tumbles. This isn’t just about Citibank—it’s about the entire banking sector dealing with macro issues like inflation, interest rates, and the looming question of whether we’re heading for a recession. Even Citibank’s strong fundamentals can’t protect it from the turbulence of the broader economy.

Long-Term Fundamentals: Is Citibank Still Worth It?

Despite the volatility, Citibank’s long-term fundamentals are strong. The restructuring that CEO Jane Fraser started a few years ago is finally yielding results. The bank has streamlined its operations, slashed costs, and made strategic plays, like its cross-border payments partnership with Mastercard​.

Another key reason to stay interested in Citibank is its dividend yield. At 3.2%, it’s attractive for income-focused investors. And with price targets as high as $92 per share, there’s still 12% upside here if you’re willing to ride out the bumps​.

But it’s not all rosy. Citibank’s revenue growth, while positive, is still relatively modest at 0.9% year-over-year​. And with the Fed cutting rates, we’re likely to see margins tighten, which could limit future profitability. Citibank’s loan growth is already slowing, and the coming economic environment isn’t exactly banking-friendly.

So, What’s the Verdict? Buy, Sell, or Hold?

Buy: If you’re in it for the long haul, buying Citibank now might make sense. With a P/E ratio of 17.5 and 23.6% earnings growth expected in 2025, the stock looks relatively undervalued compared to its peers​. Add to that the juicy 3.2% dividend, and it’s an attractive option for long-term investors who can stomach short-term volatility. Plus, if you’re betting on the restructuring paying off even more, this could be a good time to enter.

Hold: If you already own Citibank, I’d say hold on tight. There’s plenty of reason to believe the stock could climb further, especially with more Fed cuts possibly stimulating loan demand in 2025. But don’t expect a smooth ride—this stock is going to be volatile, and you’ll need patience to see the restructuring benefits play out fully​.

Sell: If you’re more risk-averse or already sitting on significant gains, now might be a good time to lock in profits. The stock has run up 28% year-to-date, and with all the uncertainty around interest rates and the economy, taking some chips off the table could be a smart move​. After all, even with strong fundamentals, Citibank is at the mercy of macroeconomic forces beyond its control.

Final Thoughts: Buckle Up for a Wild Ride

Citibank’s Q3 2024 earnings show that the bank is on solid footing, but the market isn’t giving it a free pass. With Fed rate cuts already happening and more expected, Citibank’s margins are going to be squeezed, and volatility is going to be the name of the game.

In the end, Citibank is a story of long-term potential with short-term turbulence. If you’re up for the rollercoaster, there’s upside to be had, especially with that dividend. But if you’re not willing to buckle up for the ride, it might be time to reconsider.

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