Citi’s 11%+ RoTCE Target Signals Stronger Capital Efficiency

Shares of major U.S. banks fell Tuesday after Bank of America's CEO projected lower-than-expected third-quarter investment banking fees ($1.6B-$1.8B) and flat sales and trading revenue. Analysts had anticipated $2.04B in fees. Goldman Sachs, JPMorgan Chase, Bank of America, Morgan Stanley, and Citigroup all declined. The S&P 500 Banks index dropped 0.7%.

Bank of America (BAC) CEO Brian Moynihan warned of a 10%+ decline in Q3 investment banking fees to $1.6B–$1.8B, down from $2B in Q3 2025, and flat sales and trading revenue versus $5.4B last year. BAC shares fell 5.14% to $59.47, dragging the S&P 500 Banks Index down 2.7%. Jefferies data showed IB proxy revenue for eight major global banks down 15% YoY and 27% from Q2. Other banks like Goldman Sachs (GS), JPMorgan (JPM), and Morgan Stanley (MS) also saw declines, while Royal Bank of Canada repor

Citigroup expects Q3 markets revenue to rise by mid-single digits and investment-banking revenue by low single digits. The company anticipates accelerating $500M in investments this year, focusing on marketing and customer acquisition. Citigroup's ROTCE is projected to exceed guidance, with strong growth in services, wealth, and cards. The bank repurchased $10.3B of stock in H1 and plans to exceed last year's total buybacks. Banamex deconsolidation is expected early next year, with a $9B loss. C

Bank of America (BAC) shares fell 5% after CEO Brian Moynihan forecasted a 10%-20% decline in Q3 investment banking fees to $1.6B-$1.8B, down from $2B last year. Sales and trading revenue is expected to be flat. Other banks like Goldman Sachs (GS) and Morgan Stanley (MS) also saw declines. Citigroup (C) reported a stronger outlook with mid-single-digit market revenue growth.

Citigroup CFO Gonzalo Luchetti anticipates the bank's return on tangible common equity to exceed 11% this year. The bank plans to increase stock buybacks beyond the $13 billion completed in 2025 and will accelerate $500 million in investments, including severance packages and marketing for credit cards and wealth management. Luchetti expects to remove Banamex from Citi's balance sheet in 2025, with a $9 billion loss. Citi may acquire small companies but will avoid transformative deals.

Sherritt International Corp, a Canadian miner with Cuban operations, is seeking a US backer to navigate Trump's sanctions. Citigroup and Office Depot hold claims on Sherritt's Cuban properties, valued at over $350 million, complicating potential deals. Sherritt is in talks with Gillon Capital and a consortium including Glencore. Resolving these claims could set a precedent for other Cuban investments.