'A port in the storm': Why Citi isn't afraid of tariffs

Lauren Justice/Bloomberg

Citigroup CEO Jane Fraser said that the same tariff policies that have cast a pall on the economy and stirred up uncertainty could provide opportunities for the bank.

The bank is sticking to the 2026 profitability targets it outlined in January, but amid the "fluid" economic environment, there are different levers it may pull to get there, Fraser said on the company's first-quarter earnings call Tuesday. But Citi will continue buying back capital, managing expenses and investing in businesses, she added.

"In periods of stress, we have shown that we are a port during the storm for our clients, the global markets and the economy — and this time is no different. We are ready to lean in," Fraser said. "We shall not allow the uncertainty to distract us from executing our strategy and improving our returns."

Citi execs said the bank also won't compromise on investing in its transformation — the bank's years-long effort to modernize its infrastructure and improve its data and regulatory reporting, which Chief Financial Officer Mark Mason called the company's number-one priority.

The bank's first-quarter revenue and expenses, at $21.6 billion and $13.4 billion, were stronger than analyst expectations. Mason added that, "based on what we know today," Citi expects full-year revenue to be between $83.1 billion and $84.1 billion and expenses to be just under $53.4 billion.

Net income in the first quarter hit $4.1 billion, or $1.96 per diluted share, marking a more than 20% increase from the year prior, and slamming past analyst estimates.

Citi also maintained its targeted return on tangible common equity for 2026, which it lowered to between 10% and 11% in January. Fraser said at the time that the forecast was 'a way point,' 'not a destination."

But Ebrahim Poonawala, an analyst at Bank of America, said on the call that there was "fragility" to the profitability goal that was making investors nervous. Mike Mayo, an analyst at Wells Fargo, said investors needed reassurance that Citi had proper oversight to handle the macroeconomic and geopolitical situation, whatever it may be.

Since President Donald Trump announced, and subsequently rolled back, tariff policies earlier this month, companies and investors have put strategic plans on hold and economists have ramped up their expectations of a recession.

"You are the bank that facilitates global trade in the middle of a global trade war," Mayo said. "And so I think the concern is not just the possibility that revenues will nosedive, but that credit will implode, or, as I've heard many, many times, that Citigroup is going to stub its toe on a country in the mix of it all."

Fraser said the company had strong capital and liquidity to deploy, and noted that Citi is four years into major strategic changes that have put it on "the front foot" and allow it to be "agile." She added that after the jolts of the COVID-19 pandemic and Russia's invasion of Ukraine, Citi was a hub for clients.

The bank also provides day-to-day services for local businesses less sensitive to tariffs, Fraser said.

Mason said the breakdown of the bank's services and products that fuel revenue growth may evolve as the economic landscape becomes clearer. As some lines of business face pressure, others could overperform to compensate, he said. Mason added that if revenue does decline, expenses on items like volume-related transaction costs would decrease in tandem.

"We're a very different bank than the one we were a few years ago, in terms of our business mix, our risk profile and all the investments we've made into the business," Fraser said. "And I think you can see us managing the bank, doing what we say we'll do and please take some confidence in that."

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Citi's stock price was up around 3.5% at parts of the day on Tuesday, before sliding back down in the afternoon.

The company has also been making efforts to optimize capital, Mason said. In the first quarter, Citi bought back $1.75 billion in shares, and hopes to repurchase a similar volume in the second quarter. The company authorized a $20 billion repurchase plan earlier this year, which Mason said the bank expects to execute on in "a reasonable amount of time."

However, Mason added that regulatory capital requirements, including the stress capital buffer, will play a part in how much the bank can pull from that cushion. The banking industry has been hopeful that the Trump administration's financial regulators will loosen capital requirements.

Fraser said in her opening remarks that although "the world is in a wait-and-see" mode amid a more negative macro outlook than previously expected, "the changes underway" are not all about trade and tariffs.

"In the U.S., for example, regulation and tax policy are all likely to look different in a year's time," Fraser said. "We welcome changes being discussed in our own industry to place more focus on material financial risks and make it easier for banks to contribute to economic growth and to improve client service."