Imagine a banking giant like Citigroup soaring to new heights in profits right when you least expect it—despite a hefty setback from letting go of a key part of its empire. This isn't just a story of resilience; it's a peek into the volatile world of global finance, where opportunities and challenges collide. But here's where it gets controversial: Is this rebound a sign of true strength, or just a temporary high before tougher storms hit? Stick around, because there's more to unpack that might surprise you.
The latest buzz in the financial world comes from Citigroup Inc., often known simply as Citi. On October 14, Reuters reported that the company exceeded analysts' expectations for its third-quarter profits. What made this achievement even more impressive was that every single one of its divisions achieved record-breaking revenue, even as they dealt with a significant loss from selling off a portion of their Mexico operations. Think of it like a sports team winning the championship despite losing a star player mid-season—the overall performance still shone through.
To break it down for beginners: Citi operates in various areas like consumer banking, investment banking, and wealth management. In this quarter, their services sector had its best performance ever, showing just how well-rounded the company is. The banking division, in particular, saw its revenue jump by a whopping 34% compared to the same period last year. This surge came largely from a revival in big corporate deals, as companies around the world started securing massive mergers and acquisitions. Even with uncertainties hanging over U.S. President Donald Trump's policies on tariffs—which could complicate international trade—Citi and its rivals found ways to capitalize on the momentum.
And this is the part most people miss: How do tariff policies really impact everyday banking? Tariffs can raise costs for imported goods, potentially slowing down global supply chains. For banks like Citi, this might mean fewer deals, but the rebound suggests that businesses are pushing forward anyway, perhaps betting on resolutions. It's a reminder that in finance, timing and adaptability can turn potential threats into opportunities.
Citigroup's CEO, Jane Fraser, highlighted in a statement that the bank's recent restructuring efforts have positioned it far better to compete in today's market. This isn't just corporate jargon; restructuring often involves streamlining operations, cutting unnecessary costs, and focusing on high-growth areas. As a result, Citigroup's shares climbed by 1.3% following the announcement, reflecting investor confidence.
Of course, no success story is without its hurdles. Citi had to account for a $726 million loss from selling a 25% stake in its Mexican subsidiary, Banamex. This divestiture was part of a broader strategy to refocus resources, but it still weighed on the overall numbers. Adjusted for this one-time loss, earnings per share (EPS)—a key metric showing profit per outstanding share of stock—came in at $2.24, beating the analysts' consensus of $1.90, as tracked by LSEG. For those new to this, EPS is like a report card for a company's profitability; higher than expected means the bank is doing better than predicted.
Diving deeper, the markets revenue segment grew by 15% to reach $5.6 billion. This boost was fueled by strong showings in equities (think stocks) and fixed income (like bonds). Adding to the optimism, the Federal Reserve's interest rate cut in September, along with expectations of more cuts this year, could stimulate economic activity. Why? Lower rates make borrowing cheaper, encouraging consumers and businesses to spend and invest more, which in turn creates more demand for banking services. It's a classic example of how monetary policy ripples through the economy—cheaper money might lead to more loans, but it also risks inflating asset prices.
But here's where it gets controversial: Are these rate cuts a double-edged sword? Citigroup's Chief Financial Officer, Mark Mason, pointed out during a call with reporters that high stock valuations have made certain sectors "frothy and overvalued." In simpler terms, some markets might be bubbling with inflated prices, ready to pop. This raises questions: Are banks like Citi benefiting unfairly from easy money, or is it just smart banking in a recovering economy? What do you think—should the Fed pump the brakes on cuts to avoid a potential crash?
On the credit front, things got a bit dicey. Delinquent corporate loans—those where borrowers are struggling to pay back—more than doubled from the previous year, hitting $2.1 billion. Mason explained that this spike was tied to downgrades of just two clients in their corporate portfolio, not a widespread issue. Reassuringly, Citi didn't suffer losses from the recent bankruptcies of companies like auto parts supplier First Brands or auto finance firm Tricolor. Mason emphasized that the bank hasn't spotted any alarming distress signals in its corporate or consumer credit portfolios yet. For beginners, credit costs are like the hidden fees of lending; higher delinquencies mean banks might have to set aside more money as a safety net, impacting profits.
Looking at efficiency, Citigroup's return on tangible common equity (ROTCE)—a measure of how effectively the bank turns its shareholders' equity into profits—was 8% for the quarter and 8.6% year-to-date. Excluding the Banamex loss, it jumped to 9.7%, inching closer to CEO Fraser's target of 10% to 11% for next year. ROTCE is essentially a profitability gauge; imagine it as checking how many dollars of profit a bank generates for every dollar invested by shareholders. Higher numbers mean better returns, and Citi's progress shows they're on the right track.
Mason also mentioned that the bank anticipates a reduction in its minimum capital requirements once the Basel III endgame and other regulatory changes wrap up. Capital requirements are rules dictating how much money banks must hold in reserve to cover potential losses—a safety buffer. Lower requirements could free up funds for growth or dividends. Plus, Citi is improving the quality of its regulatory reporting data, ensuring transparency and accuracy in how it reports to watchdogs.
Citi isn't the only one celebrating. Rivals JPMorgan Chase and Wells Fargo also posted stronger third-quarter profits on Tuesday, driven largely by their investment banking arms. This collective uptick highlights a broader recovery in the sector. Citigroup's shares have surged 36.5% so far in 2025, outperforming JPMorgan's 28.5% gain and Wells Fargo's 12.4% rise. Interestingly, even with this momentum, Citi's share price remains the lowest among peers relative to its book value—the net worth of the company. Meanwhile, the KBW banking index, which tracks major banks, is up nearly 15% year-to-date.
Shifting gears to the Mexico sale: Last month, Citi announced it was offloading a 25% stake in its retail unit Banamex to Mexican billionaire Fernando Chico Pardo, who heads airport operator ASUR, for approximately $2.3 billion. The plan is to eventually list the Mexico business on the stock market to sell off the remaining stake, and they turned down an unsolicited bid from Mexican conglomerate Grupo Mexico. Analysts will likely delve into the long-term effects of this divestiture during Tuesday's earnings call. And this is the part most people miss: Why divest now? Divesting from Banamex could simplify Citi's operations and reduce exposure to Mexico's volatile economy, but it also means walking away from a profitable market. Is this a strategic withdrawal or a missed opportunity? The $726 million loss underscores the costs, but the adjusted profits tell a different story.
This article was reported by Tatiana Bautzer in New York and Pritam Biswas in Bengaluru, with editing by Lananh Nguyen, Shinjini Ganguli, Bernadette Baum, and Rod Nickel. Adhering to the Thomson Reuters Trust Principles, we strive for accuracy and impartiality.
Tatiana Bautzer serves as a U.S. banking correspondent for Reuters in New York. Her background includes covering Brazilian banks and major corporate deals, IPOs, bankruptcies, and even corruption scandals. Before joining Reuters in 2015, she contributed to outlets like Exame, Istoe Dinheiro, Valor Economico, and O Estado de S. Paulo, and served as an international correspondent in Washington, D.C., focusing on multilateral institutions and trade. Bautzer holds a B.A. in Journalism and an MBA from the University of Sao Paulo.
So, what's your take on all this? Do you believe Citigroup's divestiture from Banamex is a savvy move to refocus on core strengths, or could it backfire by alienating emerging markets? And with profits rebounding, are we witnessing a banking renaissance, or just riding a wave of easy money that might not last? Share your thoughts in the comments—agreement or disagreement, we'd love to hear it!
