Wall Street analysts scrambled to update their forecasts for Citigroup on Wednesday after the bank’s leadership caught investors off guard by projecting higher spending in the months ahead.
The surprise came even as Citigroup posted impressive second-quarter results, with net income climbing 45% above analyst expectations. Despite that strong performance, shares plunged 5.3% on Tuesday.
A Bank of America analyst pointed to a combination of inflated expectations and unclear messaging during the earnings call as the root of the problem. “The culprit was a combination of high expectations and muddled messaging on the second half outlook during the earnings call,” analyst Ebrahim Poonawala wrote in a Wednesday client report. He noted that Citigroup shares had actually been up 2% before the call took place.
The bank posted a return on tangible common equity of 13.1% for the first half of the year, yet chose to maintain its full-year guidance of 10% to 11% — a decision that raised eyebrows among analysts. Oppenheimer analyst Chris Kotowski captured the confusion in his Wednesday report, titled “The Problem with Giving Guidance,” writing: “This inspired half a dozen questions on the order of, ‘You’re saying the second half of 2026 will be dreadful?’”
During the earnings call, CEO Jane Fraser and CFO Gonzalo Luchetti explained that the bank had decided to move up some of the $5 billion in additional investments it had previously identified as necessary to grow market share. The bank also said it expects to spend more than the $800 million it originally projected for employee layoffs.
When asked about the investments, Fraser characterized them as offensive moves rather than catch-up efforts.
Wells Fargo analyst Mike Mayo echoed that framing, saying: “This is not restructuring, but offensive moves to better gain share and compete in a more competitive environment, such as in credit cards.” Mayo said he still expects the bank to surpass its 11% profitability target in 2026.
Kotowski noted that the higher expense outlook limited how much he could raise his estimates. Poonawala called the situation a “tactical blip” that did not affect his target price or buy rating, though he did revise his efficiency ratio estimate upward to 60.3% from 59.6%. Bank of America also adjusted its earnings-per-share estimate for 2026, bumping it to $11.09 from $10.79.
Jefferies analyst David Chiaverini trimmed his earnings-per-share estimates for 2026 and 2027, moving them to $10.65 and $12.60 respectively, down from $10.95 and $12.75. He also kept a buy rating on the stock.
KBW analyst Chris McGratty took a more optimistic view, suggesting that the expense news was being used as a reason to lock in gains on the stock. KBW raised its full-year earnings-per-share estimate by 1%, from $11.00 to $11.15 — a more modest increase than the second-quarter beat might have otherwise justified.
Citigroup did not respond to requests for comment on the analyst reports.
