Anticipation is growing for Citigroup (C +1.52%) to release its first-quarter earnings on April 15. The banking giant's shares have fallen 16% year to date as of this writing amid a stock market sell-off fueled by economic uncertainties and the looming effects of new trade tariffs. Shareholders will seek signs of resilience to turn the stock around from an eight-month low. Despite the current environment, there are still reasons for optimism.
Here are a few reasons why Citigroup shares could be a compelling addition to your portfolio now.
NYSE: C
Key Data Points
Assessing the trade tariffs' fallout on Citigroup
The Trump administration has unveiled a trade policy overhaul, imposing a 10% flat tariff on imports from all nations, with steeper tariffs on specific countries like China. The scope and intensity of these measures surprised Wall Street, surpassing earlier expectations and likely triggering the sharp stock market plunge. Experts warn that the policy may cause short-term supply chain and economic disruptions.
For Citigroup, this tariff regime poses challenges, but also opportunities to leverage its global reach.
On the downside, the bank faces immediate pressure, as clients may grow cautious and reassess investment opportunities. If consumer spending weakens, everything from mortgage lending to auto financing and credit card businesses could see rising delinquencies and defaults. Additionally, Citigroup's investment banking arm might experience stalled deal flow. Simply put, the trade war presents a clear headwind for the entire banking industry.
That said, some segments of Citi's global franchise could benefit from the trade chaos. Services, particularly the Treasury and Trade Solutions (TTS) business handling cash management and working capital solutions, should capture new business as supply chains reroute and corporate customers require hedging foreign exchange. Within the capital markets business, record trading volumes may be potentially offsetting declines in fees elsewhere.
While it's too early to fully assess the tariff effects, the widespread market confusion may reward investors willing to stomach near-term volatility.
Image source: Getty Images.
Q1 earnings preview for Citigroup
Citigroup's fiscal 2025 Q1 earnings report will allow management to update the market, with revenue and earnings expected to be solid, reflecting the pre-trade war period. However, uncertainty surrounds Citi's allowance for credit losses (ACL), which it adjusts to anticipate loan issues. A substantial increase from 2024 could signal concerns about borrowers' health.
The bank previously projected revenue growth of 3% to 4% for the full year 2025, with a net income increase boosted by cost savings initiatives. While revisions may arise, evidence of Citi's underlying strength could be well-received by the market. Management's commentary and guidance will be key, but the bigger takeaway is that the bank remains profitable with solid fundamentals.
Reasons to turn bullish on the stock
In my view, the strongest reason to buy Citigroup stock now is its 30% decline from recent highs. This may have priced in some of the more extreme scenarios, setting a low bar of expectations and positioning it to outperform.
What I like about the stock as an investment is its relative value among mega-cap banking peers like JPMorgan Chase, Bank of America, and Wells Fargo. Citigroup shares trade at just 0.6 times its book value as a price-to-book (P/B) ratio and 8 times its consensus 2025 earnings per share (EPS) estimate as a forward price-to-earnings (P/E) ratio, both at a steep discount to the group. That suggests that its shares may be undervalued.
Citigroup's edge over rivals is its international corporate lending profile, with 44% of 2024 corporate lending revenue from outside the U.S. The other big four banks have a heavier domestic focus, exposing them to greater tariff-related disruptions.
C Price to Book Value data by YCharts.
Citigroup stock also shines with its 3.8% dividend yield, notably higher than Bank of America's 2.9%. Despite near-term turbulence, the dividend remains supported by underlying cash flows and a robust balance sheet.
C Dividend Yield data by YCharts.
The big picture for investors
Citigroup shares look like a buy-the-dip opportunity, and the upcoming Q1 earnings could be the catalyst for the stock to regain its footing. Investors can pick up an industry leader at a discount that is well-positioned to emerge stronger and reward shareholders over the long run. The prudent move is to start with a small position within a diversified portfolio.
