What happened

Shares of Citigroup (NYSE:C) climbed 13.6% in April, according to data provided by S&P Global Market Intelligence, as investors cheered better-than-expected first-quarter earnings and an improved full-year outlook from management.

So what

On April 15, Citigroup reported first-quarter earnings of $1.87 per share on revenue of $18.58 billion, beating consensus by $0.08 per share on earnings and $20 million on revenue. Total revenue fell year over year due to lower equity market sales, and the impact of a mark-to-market loss on loan hedges in the international clients group.

A banker reaches across his desk to shake hands with customers.

Image source: Getty Images.

On a post-earnings call with investors, CEO Michael Corbat talked about the uncertainty Citi and other banks were facing coming into 2019, and how the bank's outlook has changed in the months since:

When we entered the year, we talked about the need for us to be flexible to meet a range of operating environments, given the way 2018 ended. We have multiple levers at our disposal, including expenses, balance sheet, and continued credit discipline -- I think we use them correctly -- and now the environment seems to be normalizing. While GDP [gross domestic product] growth does appear to be slowing somewhat, we still see good consumer and corporate engagement.

The bank now anticipates "modest" revenue growth coupled with "flattish" expenses and "higher but manageable cost of credit," to combine for profit improvements for the rest of the year.

Citi has far greater international exposure than most large U.S. banks, and it reported a mixed picture in key foreign markets. Mexico reported 5% underlying growth year over year, while in Asia consumer revenue grew 1% year over year as growth in deposit, lending, and insurance revenue was offset by lower investment revenue.

The stock also got a boost late in the month from Jefferies analyst Kenneth Usdin; in downgrading Bank of America to hold from buy, he said that among the largest U.S. banks, "we prefer putting new money into Citi."

Now what

Citi said it is "on track" to return at least $60 billion to shareholders in the years to come, after spending more than $5 billion in the quarter on buybacks and dividends. The company's share count was reduced by 9% from a year ago, which should help boost earnings-per-share comparisons.

Company management is optimistic about the future, but it's also watching the Mexican economy closely, and Asia remains a bit of a wild card.

Citi shares are inexpensive, carrying a price-to-earnings ratio 10% below those of rivals Bank of America and JPMorgan Chase. But in the current environment, and with the risk that comes with that higher international exposure, some sort of a discount seems appropriate. It won't be easy for Citigroup to close the valuation gap.