Citigroup Stock Gains 4% Post Q3 Earnings: Should You Hold or Fold?

Shares of Citigroup, Inc. C rose nearly 4% since the release of its third-quarter 2025 results on Oct. 14. This reflected investor optimism over the bank’s solid quarterly performance and optimistic outlook for 2025.Price Performance Image Source: Zacks Investment Research The company’s quarterly top and bottom-line numbers easily outpaced the Zacks Consensus Estimate. Following the strong quarterly results, is Citigroup’s stock worth adding to your portfolio? Before checking that out, let us discuss the company’s quarterly performance in brief.Citigroup’s 3Q25 HighlightsNet Interest Income (NII) & Non-Interest Revenues: In the third quarter of 2025, Citigroup reported an NII of $14.9 billion, marking an 11.8% increase from the prior-year quarter. The rise was primarily driven by increased average deposit balances and improved deposit spreads. Its peers, Wells Fargo’s WFC NII rose 2.2% year over year, while that for Bank of America BAC rose 9% in the third quarter.Citigroup’s non-interest revenues rose 4.4% year over year to $7.2 billion in the third quarter, primarily driven by strong momentum across Markets, Banking (especially investment banking) and Wealth divisions.Non-Interest Expenses: Citigroup’s operating expenses rose 8.7% year over year to $14.3 billion. This increase was primarily due to a rise in almost all components except advertising, and marketing costs and restructuring expenses. For Wells Fargo, non-interest expenses grew 5.9%, while Bank of America reported a 5.2% year-over-year increase in the third quarter.Asset Quality: The company’s total non-accrual loans jumped 69.8% year over year to $3.7 billion. C’s allowance for credit losses on loans was $19.2 billion, up 4.6% from the prior-year quarter. Alternatively, provisions for credit losses and benefits, and claims were $2.5 billion, down 8.4%.What's Ahead for Citigroup Stock?Streamlining & Strategic Overhaul Progressing Well: Citigroup continues to advance its multi-year strategy to streamline operations and focus on its core businesses. Since announcing plans in April 2021 to exit consumer banking in 14 markets across Asia and EMEA, the company has completed exits in nine countries.In September 2025, Citigroup announced an agreement to sell a 25% stake in Banamex to Mexican business leader Fernando Chico Pardo, reaching a milestone toward full divestiture and deconsolidation of Banamex. The bank is also progressing with the wind-down of its Korean consumer banking operations, the exit from Russia, and preparations for an IPO of its Mexican consumer, small business and middle-market banking operations.Aligned with its goal of achieving leaner operations, Citigroup has overhauled its operating model and leadership structure, reduced bureaucracy and complexity while enhancing efficiency. In January 2024, the company announced plans to cut 20,000 jobs (about 8% of its global workforce) by 2026, having already lowered headcount by more than 10,000 employees.CEO Jane Fraser highlighted during the third-quarter 2025 earnings call that the consistent execution of Citigroup’s transformation strategy has improved business performance, boosted returns and strengthened its competitive position.Citigroup expects total revenues to exceed $84 billion in 2025, with revenues projected to see a 4-5% CAGR through 2026. The company also anticipates achieving $2-2.5 billion in annualized run-rate savings by 2026, reflecting the tangible benefits of its simplification and efficiency initiatives.Interest Rate Cuts to Aid NII: In 2024, the Federal Reserve reduced interest rates by 100 basis points, followed by a 25-basis-point reduction in September 2025. Given this, the company’s NII is benefiting. In the first nine months of 2025, Citigroup's NII rose 9% year over year.Though the Fed has hinted at two additional rate cuts by the year-end, stabilizing funding costs and modest loan growth will continue to aid C’s NII expansion in the upcoming period.Following the solid NII performance till September, management raised its projection for NII (excluding Markets) for 2025. The metric is expected to increase 5.5%, up from the prior 4% rise.Initiatives Driving Efficiency & Diversification: Citigroup continues to advance its agenda through digital transformation, process automation and targeted partnerships that enhance efficiency and diversify earnings.The bank is embedding artificial intelligence (AI) and automation across its global operations to streamline workflows and strengthen risk controls. During the third quarter earnings call, management stated that its nearly 180,000 workforce across 83 countries now uses proprietary AI tools, reflecting broad adoption of technology that supports real-time, cross-border payment and settlement capabilities. These initiatives are expected to deliver sustainable productivity gains and reinforce the company’s leadership in digital banking infrastructure.In parallel, the company is deepening its presence in private markets and wealth management through partnerships that enhance revenue diversity and client engagement. In September 2025, Citigroup launched an $80-billion customized portfolio offering with BlackRock Inc., providing clients with tailored exposure across public and private markets. In June 2025, it partnered with Carlyle Group to expand asset-based private credit in fintech lending via the SPRINT platform. In September 2024, Citigroup and Apollo Global Management created a $25-billion private credit direct lending platform to meet rising corporate financing demand.Solid Liquidity Aid Capital Distribution: C enjoys a strong liquidity position. As of Sept. 30, 2025, cash and due from banks and total investments aggregated to $474.3 billion, while its total debt (short-term and long-term borrowing) was $370.6 billion. Post-clearing the 2025 Fed stress test, the company hiked its dividend 7.1% to 60 cents per share. In the past five years, it has raised its dividends three times. It has a payout ratio of 33%. It has a dividend yield of 2.4% above the industry average of 1.9%.Dividend Yield Image Source: Zacks Investment Research In January 2025, Citigroup's board of directors approved a $20-billion common stock repurchase program with no expiration date. As of Sept. 30, 2025, nearly $11.3 billion worth of authorization remained available. Supported by a strong capital and liquidity position, its capital distribution activities seem sustainable.Assessing Citigroup Investment Worthiness?Solid revenue growth, the acceleration of its transformation strategy, and an optimistic 2025 outlook indicate that Citigroup is well-positioned for sustainable long-term growth. The company's advanced key initiatives, including exits from underperforming markets, redirection of capital into high-return businesses, a disciplined cost-reduction plan, and firm-wide AI rollout supporting operational efficiency, look encouraging. Over the past week, the company’s earnings estimates for 2025 and 2026 have been revised upward.Estimate Revision Trend Image Source: Zacks Investment Research While risks remain, including credit quality pressures and execution challenges related to large-scale restructuring, management reaffirmed its commitment to disciplined capital return via increased share repurchases and regular dividends, while improving returns over time. The company is aiming for a 10-11% return on tangible equity by 2026 amid ongoing regulatory and macroeconomic challenges.From a valuation standpoint, C appears inexpensive relative to the industry. It is currently trading at a discount with a forward 12-month price-to-earnings (P/E) of 10.77X, well below the industry average of 14.83X. Price-to-Earnings F12M Image Source: Zacks Investment Research Further, Bank of America is trading at a 12-month forward P/E of 12.62X while Wells Fargo is trading at 13.17X. Hence, C is trading at a discount compared with both.As such, investors can consider retaining the C stock for now to generate a healthy long-term return. Citigroup currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Free Report: Profiting from the 2nd Wave of AI ExplosionThe next phase of the AI explosion is poised to create significant wealth for investors, especially those who get in early. 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