Citigroup is a solid global money center bank that has done a decent job cleaning up legacy issues and fortifying the risk profile in the wake of the GFC, though it still lags peers on several fronts including profitability.

Citi has more geographic diversification than peers owing to its international presences, though the retail side is shrinking considerably as Citi exits most of Asia and Mexico, refocusing around a global wealth management/private bank strategy.

Citi lags on the domestic deposit front, with less than half of the deposit base of money center peers and a much smaller physical footprint, though it has been focused on driving deposit flows the past couple of years.

Citi still lags peers on profitability (both ROA and ROTCE); CEO Fraser adopted the profitability gap as a key focus point as well, and we see Fraser’s strategic moves (e.g. int’l consumer exits, headcount reduction in management layers) as aimed at capital and expense optimization to improve ROE.

While not as severe as a Wells-type situation, Citi’s regulatory mishaps introduce risks should the bank fail to show improvement in internal controls, or if another major risk management failure crops up. Our base case: Citi will be able to satisfy regulators and end up with improved infrastructure, though it will likely be a multi-year process with resultant upward cost pressures.

Citi’s global footprint makes it more exposed to emerging markets and non-domestic economies; in the near-term, that could create earnings and capital volatility to the degree tariff policies drive USD appreciation.