Citigroup Inc. (C)

Total return at 5 years: 4.9%/year = 2.4% appreciation + 2.4% dividend. The target price ($140) is ex-dividend; the $16 in dividends collected over 5 years are added separately.

By both methods, the value today (DCF $223 · Multiples $126) exceeds the market price ($124).

Today — fairly valued: at $124 trades ~1.6% below its value discounted to today (~$126); the discount is positive but does not reach the margin of safety we require (≥38%).

At 5 years — En valor: the target price ($140) plus dividends yield between the 4% floor and the 10% average return — a reasonable return, though without the margin of a great investment.

The bridge: the return at 5 years exceeds the risk-free rate (4.5%) — but the discount does not reach the required margin of safety (≥38%). To require a 15% annual return, it would need to be bought at ~$80.

Educational / informational. Does not constitute investment advice.

The inverse approach: instead of projecting growth to obtain the value, the market price ($124) is taken as given and it solves for what annual owner-earnings growth would need to hold for 5 years for the present value —at the method's rate (4.5%, no-growth terminal)— to equal that price. It is the disconfirmation test: the expectations the price already pays for, contrasted against the method's projection.

The market discounts less growth (-4.9%/year) than we project (8.0%/year) → if the base case holds, there is margin: perception is more pessimistic than the estimated reality.

That growth implies ~$10.2 bn of owner earnings in year 5 (vs ~$19.4 bn of our base case). It recalculates if the DCF assumptions are edited.

A bank is valued on equity (P/E × common earnings + price/tangible book), not EV: deposits and debt are funding. It returns capital via dividend + buyback —the buyback reduces the share count, so earnings per share grow faster than aggregate earnings—. Total return adds the dividend collected along the way. In edit mode, the metric, shares, dividend, and exit multiple can be adjusted.

Year 0 (TTM) uses normalized FY2025 net income to common ($13.19 billion, EPS ~$7.04), the last window with facts fully ingested in the XBRL at the time of this valuation (comunicado state B: no need to re-base by levels). The Jul 14, 2026 8-K carries no explicit numerical guidance for revenue or EPS for 2026 — only the 12% dividend increase and the new $30 billion buyback authorization, both incorporated into the year-1 share and dividend path. Base-case growth decelerates from ~8% (year 1, reflecting the momentum already observed in the first half of 2026) to ~4% terminal; RoTCE improves from 7.7% to 9.6% in the base case, without reaching the 10% quality bar within the horizon. Buybacks are projected at -3.5%/year, identical across the three scenarios, consistent with the pace revealed FY24→FY25.

Today's multiple compresses on its own going forward as the metric per share grows (accelerated by the buyback, which reduces the share count). The exit multiple at 3 years is higher than the terminal at 5 years —at 3 years there is more growth still ahead—. Total return adds the dividend collected; the required return is applied to the base scenario.

They are valued separately, with their own rationale, and are not incorporated into the base or the verdict (they are excess return). When assigning them value — in Editmode —, the total with optionalities updates live, without moving the base.

The verdict, the base CAGR, and the margin of safety are always calculated on the base; optionalities do not alter them (with optionalities at $0 they do not move).

Each card fixes a required annual return and answers: if the business is worth $140 in 5 years, what is the maximum that can be paid today to obtain that return? Since it now trades at $124, the margin of safety is how much cheaper the market is than that maximum. The three thresholds: 4% covers inflation (the floor), 10% is the long-term average return, and 15% is the level of a great investment.

With a target price of $140 in 5 years plus $16 of dividends collected (the dividend adds to the return, not to the price) and a required return of 4.5% annually, the maximum to pay today is $126. Against the current market price ($124), the margin of safety is 1.6% (trades below the maximum → there is margin) and the total return at that price would be 4.9% annually.

• Entry P/E multiple. The current price reflects a reference net income to common (FY2025) that already lags the pace shown in the first half of 2026.
• Improvement already recognized. The profitability improvement already recognized in the price leaves little visible margin of safety today.
• Forward multiple compression. The entry price/tangible-book multiple compresses toward year 5 in the base case, as tangible book value per share compounds.
• Base-case total return. +5% annually, supported in part by the growing dividend yield.

• Cash/capital generation. The bank generates regulatory capital consistently, though in 2025 it distributed more than it generated in the year, drawing on CET1 headroom.
• RoTCE below the bar. 7.7% in FY2025, still below the 10% the method requires as the quality threshold.
• Improving trend. RoTCE rose from 7.0% (FY24) to 7.7% (FY25) and to 8.7% annualized in Q2'26, a sustained improving trajectory in recent periods.
• Reserves and credit. Net credit losses of $9.1 billion in FY2025, with a $1.2 billion reserve build tied to macroeconomic changes.

Annual levels from the official filing (10-K); the % over each bar is the year-over-year (YoY) growth vs the prior year.

Citi does not have a volume×price driver in the sense of a marketplace: the banking operation is anchored on balance-sheet levels — deposits (funding), loans (portfolio), regulatory capital (CET1) and tangible book value per share — taken from the FY2025 10-K and the Q2 2026 8-K financial supplement, all reported levels rather than derived rates.

The % are the annual (year-over-year) growth: each year —historical and projected— vs the prior one; the TTM (trailing 12m) vs the TTM of a year ago, to avoid overlapping windows. The historicals are exact figures from the official filings; the projected years come from the year-by-year model (the intermediate years without their own series are interpolated between the anchors). The projected columns (+1y…+5y) are 12-month windows counted from the TTM close (31-dic-2025): the projection starts from the most recently reported data, not the fiscal year. The projected base is realistic and unbiased — the risk discount is applied at the end, via the required return. The rationale for each metric is in the (i).

• Revenue FY23-FY25. Annual growth of 3.6%/3.4%/5.6%, accelerating at the margin.
• First-half 2026 momentum. Revenue +14% year over year, with a quarterly record in Services and double-digit growth in four of five businesses.
• Sustainability of the pace. Much of the Q2'26 jump came from Markets (Equities +45%), a structurally volatile trading business that cannot be extrapolated without adjustment.
• USCC under pressure. The U.S. consumer card segment faces near-term headwinds from portfolio investments.

• GSIB scale and geographic reach. Presence in ~160 countries with ~226,000 employees; a meaningful regulatory and operational barrier against regional banks.
• Five interconnected businesses. Services, Markets, Banking, Wealth and USCC diversify the revenue mix across transaction banking, trading, investment banking and consumer.
• Emerging-market concentration. ~25% of 2025 revenue comes from emerging markets, an exposure that adds macro and currency volatility.
• Dependence on co-branding relationships. The five largest co-branded card relationships account for ~12% of total 2025 revenue and are subject to competitive renewal.
• Ongoing simplification process. The sale of Banamex and exit from Russia reduce complexity but generate one-time charges, such as the Banamex goodwill impairment.

• !Credit quality (net charge-off rate)1.21% annually
• ✕Value creation (ROTCE − 10% bar)-2pp
• ✓Funding (deposit base)Deposits $1,403.6 bn

A traffic-light interpreted by the method (not generic): float (negative WC) adds up, capex is judged by incremental ROIC (malinvestment test), and a lender is not subjected to corporate solvency. The (i) shows the derivation of each number.

ⓘ Has a loan book: credit health (delinquency, coverage, normalized CECL, RoA/RoE) is evaluated separately, not with corporate solvency.

• Regulatory capital. CET1 of 13.2% at year-end 2025, down from 13.6% a year earlier due to buybacks and risk-weighted asset growth.
• Balance-sheet scale. Total assets of $2,657 billion and deposits of $1,404 billion support a diversified funding base.
• Portfolio quality. Net credit losses of $9.1 billion in FY2025 (~1.2% of total loans, estimated), with no signs of acute deterioration.
• Consent orders. Two outstanding regulatory orders limit strategic flexibility, including prior approval for significant acquisitions.

How cash comes in and how it is deployed. In green, the business's own cash (the owner-FCF it generates and reinvests); in gray, the float and credit — customer and funding money, which is not the shareholder's.

Citi returned $18.62 billion to common shareholders in FY2025 ($5.37 billion in dividends and $13.25 billion in buybacks), above the net income to common generated ($13.19 billion), financed by a decline in CET1 from 13.6% to 13.2%. The Q2 2026 payout was ~92% of the quarter's earnings. There was no material M&A: the bank is in active divestiture (Banamex, Russia), not expansion.

Who owns the shares — the alignment and whether there is a controlling shareholder.

• Regulatory transformation. Under two consent orders (FRB and OCC, 2020) on controls and data; the OCC determined insufficient progress in 2024.
• Capital allocation. Payout of ~92% in Q2'26 (dividends + buybacks), with the new $30 billion buyback program approved.
• Skin in the game. Directors and executives hold in aggregate ~0.11% of shares, a low level of direct ownership.
• Candor in communication. The press release explicitly acknowledges near-term headwinds in the U.S. consumer card portfolio, without dressing up the result.

• Much of the profitability improvement has already been recognized by the market ahead of this valuation.
• Return on tangible common equity remains below the 10% bar for most of the projected horizon, so the current price already prices in a story of gradual multiple re-rating, not a discount for an unrecognized catalyst.
• The outstanding regulatory consent orders (FRB/OCC) and the simplification process (sale of Banamex, exit from Russia) introduce execution noise that the market appears to be pricing reasonably, without a clear pessimistic bias.

No clear source of discount is identified, whether missing-buyers or motivated-sellers: the market has already recognized the recent RoTCE improvement, so the margin of safety available today is limited and depends on the improving return trajectory being sustained beyond what has already been observed.

The annual return (CAGR at 5 years) in each scenario, with the total period return below — the margin of safety made visual: upside range wide, downside range narrow.

Even in the bear scenario, the return holds at -4%/year (-20% total): the margin of safety protects the downside. The bull (+11%/year, +72% total) exceeds it comfortably — a favorable asymmetry, with a narrow downside range and a wide upside range.

• Capital and stress testing. Capital returns depend on passing the annual CCAR process and maintaining regulatory buffers.
• Controls and data. The FRB/OCC consent orders could lead to additional sanctions if the deficiencies are not remediated.
• Cybersecurity. Growing concentration in external technology vendors amplifies the risk of systemic disruption.
• Credit and macro. Employment deterioration or a recession would affect the consumer ($409 billion) and corporate ($344 billion) portfolios.
• Geopolitics and tariffs. Tariff increases and geopolitical tensions raise macro uncertainty across multiple business lines at once.

Each thinker's analytical framework applied to our data.

• Buffett / Graham Quality + margin of safety

  Fails the quality gate: ROTCE 8% does not clear the 10% bar.

• Peter Lynch Growth at a reasonable price (GARP)

  A fast grower growing 8% at a PEG of 2.2 → expensive for its growth.

• Joel Greenblatt Cheap and high-return (Magic Formula)

  Not applicable — the Magic Formula excludes financials and regulated businesses (EBIT/EV does not capture the operating leverage).

• Howard Marks Perception vs reality + cycle

  The price discounts -5% vs our 8%: perception is more pessimistic than reality, with an identified source of the discount.

• Seth Klarman Capital protection (bear scenario)

  Bear-scenario floor -7%/yr, bull-scenario ceiling +9%/yr over 5y: reasonable asymmetry, without an ample cushion.

• Pat Dorsey Moat strength (Five Rules)

  A narrow moat, stable; sources: cost advantage, efficient scale, switching costs → partially passes the Five Rules.

• Aswath Damodaran Expectations implied by the price

  Justifying the price requires discounting -5%, within what we project (8%) — the story squares with the numbers.