The Zhitong Finance APP noted that among large banks in the United States, Citigroup (C.US) is the most undervalued based on its price-to-book ratio. This lower valuation is primarily due to some structural factors that have led to its valuation being lower than its peers for many years.
Analyst Labutes IR stated in January 2023 that its stock was somewhat undervalued at that time, making it a good choice for long-term investors from both earnings and value perspectives. Since then, Citigroup's stock has performed quite well, significantly outperforming the overall stock market, with a gain of over 82% including dividends, while the S&amp;P 500 index rose by 55% during the same period.
Despite its strong performance, Citigroup's valuation remains lower compared to its closest peers—JPMorgan Chase (JPM.US), Bank of America (BAC.US), and Wells Fargo (WFC.US). Its stock is currently trading at about 0.81 times its book value, while its competitors have much higher multiples, as shown in the chart below.
<img src="https://imageproxy.pbkrs.com/https://img.zhitongcaijing.com/image/20250630/1751267793381646.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="image.png" original-src="https://imageproxy.pbkrs.com/https://img.zhitongcaijing.com/image/20250630/1751267793381646.png"/> This is largely determined by its business structure. Compared to its peers, Citigroup has a much larger exposure to international markets, including some high-risk areas (such as Russia), and it also has greater exposure to higher-risk banking products like credit cards.
Although the bank's strategy has been to streamline its international business and exit several underperforming markets, Citigroup's profitability remains below average, making its lower valuation compared to peers reasonable.
In fact, its return on equity (ROE)—a key measure of bank profitability—was only 8% in the first quarter of 2025, while JPMorgan's ROE in the same quarter reached 18%, above the industry average. This explains why JPMorgan's valuation (currently at 2.4 times the price-to-book ratio) is much higher than Citigroup and other large U.S. banks.
From an earnings perspective, after experiencing significant stock price increases over the past two and a half years, Citigroup currently offers a dividend yield of about 2.65%. This is no longer very attractive, either in absolute terms or compared to other banks, as the average dividend yield in the banking industry is about 3.15%.
This yield is also far below the situation when analyst Labutes last analyzed the bank, when Citigroup offered a dividend yield of over 4%. Therefore, Labutes does not believe that dividends are the main factor in its investment value at present; future earnings growth seems to be the main driver of potential upside.
However, despite the significant success of its restructuring plan and the overall improvement in the bank's profitability in recent years, there are still some issues to be resolved. For example, despite efforts over the past three years to sell its Mexican consumer finance subsidiary (Banamex) to competitors or ultimately pursue an IPO, Citigroup has so far failed to successfully dispose of this business, indicating that the bank still needs to make further efforts to achieve its desired scale and business structure
Currently, its business is divided into five main operating departments: Banking, Markets, Wealth, U.S. Personal Banking, and Services. As shown in the figure below, Citigroup's business has a remarkable diversified layout among the five operating departments, with Services and U.S. Personal Banking being the main revenue growth drivers in recent years.
<img src="https://imageproxy.pbkrs.com/https://img.zhitongcaijing.com/image/20250630/1751266973865509.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="image.png" original-src="https://imageproxy.pbkrs.com/https://img.zhitongcaijing.com/image/20250630/1751266973865509.png"/>
Due to restructuring efforts and actions taken by management to improve efficiency and reduce overall business risk, along with the benefits brought by higher interest rates since 2022, Citigroup has achieved growth in both revenue and profit in recent years, and its business structure has improved compared to a few years ago.
Recently, supported by relatively high interest rates in the U.S. and increased capital market activity in recent months, its operational momentum has been quite positive. In fact, in the first quarter of 2025, Citigroup's revenue reached $21.6 billion, a year-on-year increase of 3%. It set revenue records in both the U.S. Personal Banking and Wealth Management departments, and the Banking division also performed well (with revenue increasing by 12% year-on-year), particularly in the equities business, which saw a 23% year-on-year revenue growth.
In terms of expenses, the bank also performed very well, with overall expenses decreasing by 5% year-on-year to $13.4 billion due to reduced regulatory-related issues and restructuring costs. The dual effect of revenue growth and expense reduction improved its efficiency ratio by 490 basis points year-on-year compared to the first quarter of 2024, reaching 62% in the last quarter. This aligns with its mid-term goal of maintaining an efficiency level between 60-63%.
Regarding asset quality, Citigroup's credit costs exceeded $2.7 billion in the first quarter of 2025, a year-on-year increase of 15%. This was mainly due to credit card-related losses and increased credit loss provisions due to heightened macroeconomic uncertainty. This indicates that asset quality remains a weak link in Citigroup's investment value.
Its net profit for the quarter was $4.1 billion, a year-on-year increase of 21%; the return on tangible common equity (RoTE) was 9.1%, still below its mid-term target of 11%-12%. As of the end of March, its common equity tier 1 capital ratio (CET1) was 13.4%, approximately 130 basis points above regulatory requirements, with a leverage ratio of 5.8%. Considering the bank's risk profile, this appears to be a sufficient capital level, which was also confirmed by the recent stress test results from the Federal Reserve.
Indeed, all 22 banks participating in the test were able to maintain capital adequacy ratios above the minimum requirements under a hypothetical economic recession scenario, strongly indicating that the U.S. banking system is well-positioned to cope with potential economic downturns. In adverse scenarios, total expected losses exceed $550 billion, yet banks can withstand these losses without jeopardizing capital levels, indicating that large U.S. banks still have sufficient capital to withstand severe negative shocks
In a severe scenario, a global economic recession would lead to a 5.9 percentage point increase in the U.S. unemployment rate to a peak level of 10%, a 30% drop in commercial real estate prices, and a 33% decline in housing prices. In this scenario, the overall CET1 ratio of the U.S. banking system is expected to average a decline of 1.8 percentage points, which seems manageable given the good capital condition of the entire industry. However, investors should note that the adverse scenario set for 2025 is not as harsh as that for 2024, making it easier for banks to report better metrics in this year's stress test results.
Citigroup is no exception, performing well in the Federal Reserve's stress test, reporting a minimum CET1 ratio of 10.4% under adverse conditions. This is an improvement over last year's results, where it was predicted that Citigroup's minimum CET1 ratio would drop to 9.7% under adverse conditions. However, this still represents a decline of about 320 basis points compared to its CET1 ratio at the end of 2024, indicating that Citigroup's risk profile within the U.S. banking system remains above average.
Nonetheless, its higher risk profile is already reflected in its capital requirements that are above those of its peers, and the bank appears to be in a favorable position to cope with potential economic downturns, allowing it to continue its capital return strategy.
In the first quarter of 2025, Citigroup returned a total of $2.8 billion in capital to shareholders through stock buybacks and dividends. The bank is expected to update its capital return strategy next week based on the results of the Federal Reserve's stress test. Given its good capital condition, it is anticipated that its capital return strategy will not change significantly, meaning it will continue to return most of its annual profits to shareholders in the form of dividends and stock buybacks, which is a positive factor for its future investment value.
Conclusion
Although Citigroup has a higher risk profile compared to other large U.S. banks, this seems to be reflected in its lower valuation and higher capital requirements. As indicated by the recent 2025 Federal Reserve stress test results, the bank is well-prepared in terms of capital for the risks it undertakes.
Analyst Labutes believes that as the bank continues to take significant measures to improve its business structure and reduce overall balance sheet risk, the valuation gap between it and its closest peers should continue to narrow, making it an interesting &#34;value stock&#34; choice in the U.S. banking industry

Citigroup has the lowest price-to-book ratio among large banks in the United States, and its valuation is relatively low mainly due to structural factors. Although its stock has performed well, with an increase of over 82%, its valuation remains lower compared to competitors like JPMorgan Chase, with the current trading price at approximately 0.81 times its book value. Citigroup's profitability is below the industry average, with a return on equity (ROE) of only 8%. Its dividend yield is about 2.65%, which is less attractive compared to the industry average of 3%

- Citigroup is currently the lowest-valued major U.S. bank based on price-to-book ratio, primarily due to structural factors affecting its valuation compared to peers.  
- Despite a strong stock performance with an 82% increase, its valuation remains lower than competitors like JPMorgan Chase and Bank of America, attributed to its higher exposure to international markets and riskier products.  
- Analysts suggest that while Citigroup's restructuring efforts have improved its financials, challenges remain, and its risk profile is reflected in its capital requirements, making it a potential value investment as it continues to enhance its business structure.

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Citigroup

JPMorgan Chase

Wells Fargo

Bank of America

The Federal Reserve's stress tests show resilience, and Citigroup's stock price is expected to outperform its Wall Street peers due to its "value" attributes