⚠ Lending More to Leveraged ClientsModerate threat

Citigroup (C) — threat to the moat

Citi's trading growth now comes from lending to leveraged funds, and that loan book grew 29% in a year.

The fastest growth in Markets is lending. Average Markets loans were $176 billion in the second quarter of 2026, against $136 billion a year earlier1, up 29%. Prime balances rose nearly 60%2.

Markets average loans ($bn)136Q2 2025162Q1 2026176Q2 2026Citigroup Q2 2026 earnings release
Up 29% in a year.

Most of that lending is to funds and institutions against collateral. It earns a spread every day and ties clients to the desk. It also puts Citi on the other side of leveraged positions, where losses arrive when prices gap faster than margin can be called.

The segment's risk measure moved less. Average value-at-risk was $122 million in the quarter, against $117 million a year earlier3.

It is now a large part of Citi's lending. Markets' average loans of $176 billion compare with Citi's total end-of-period loans of $794 billion in June 202645, about 22%6.

The growth is planned to continue. Citi's Investor Day put spread-financing loans growing about 14% a year from 2022 to 2025 and targets mid-teens annual growth in the near term7.

The reserves have not kept pace. The allowance on Markets loans was 0.86% of loans in the first quarter of 2024 and 0.67% at the end of 20258, while net credit losses were 0.15% of loans in 20259. The book has been safe so far; the reserve ratio assumes it stays that way.

Loan growth is the number to follow. Markets loans rising another 25% in a year while the firm's capital ratio fell further would mean the trading growth was being paid for with capital.

References
  1. ReportedAverage Markets loans were $176 billion in the second quarter of 2026, against $136 billion a year earlier, up 29%.
    Citigroup second-quarter 2026 earnings release, Form 8-K exhibit 99.1 - Services, Markets and Banking results and key metrics. — Q2 2026 · publ. 14 July 2026 · source ↗
  2. ReportedPrime balances rose nearly 60%.
    Citigroup second-quarter 2026 earnings release, Form 8-K exhibit 99.1 - Services, Markets and Banking results and key metrics. — Q2 2026 · publ. 14 July 2026 · source ↗
  3. ReportedAverage value-at-risk was $122 million in the quarter, against $117 million a year earlier.
    Citigroup second-quarter 2026 earnings release, Form 8-K exhibit 99.1 - Services, Markets and Banking results and key metrics. — Q2 2026 · publ. 14 July 2026 · source ↗
  4. ReportedMarkets' average loans of $176 billion compare with Citi's total end-of-period loans of $794 billion in June 2026, about 22%.
    Citigroup second-quarter 2026 earnings release, Form 8-K exhibit 99.1 - Services, Markets and Banking results and key metrics. — Q2 2026 · publ. 14 July 2026 · source ↗
  5. ReportedMarkets' average loans of $176 billion compare with Citi's total end-of-period loans of $794 billion in June 2026, about 22%.
    Citigroup second-quarter 2026 earnings release, Form 8-K exhibit 99.1 - firm results, returns, efficiency, capital returned, tangible book value and All Other. — Q2 2026 · publ. 14 July 2026 · source ↗
  6. Moat Explorer calcMarkets' average loans of $176 billion compare with Citi's total end-of-period loans of $794 billion in June 2026, about 22%.
    Moat Explorer calculation from Citigroup and peer figures ($ millions unless stated). Deposit cost: Bank of America 34,513 / (1,469,705 + 514,477) = 34,513 / 1,984,182 = 1.74%; Citi non-interest-bearing share 202,705 / 1,363,051 = 14.9%, about 15%; gap to JPMorgan 2.57% - 1.80% = 0.77 points; 0.0077 x 1,363,051 = 10,495, about $10.5 billion a year; 10,495 / 19,828 pre-tax income = 53%, more than half; JPMorgan average deposits 2,506,565 / 1,363,051 = 1.84 times. Market value: JPMorgan 911.91 / Citi 225.24 = 4.05, about four times; Citi / JPMorgan 225.24 / 911.91 = 0.247, about a quarter, about 0.25. Card partners: 12% x 85,225 = 10,227, roughly $10.2 billion. Institutional deposits 934 / 1,403.6 = 66.5%, about two-thirds, about 67%; other deposits 1,403.6 - 934 = 469.6. Banamex stake sold 25% + 22.6% = 47.6%. Shares: period-end common shares 1,747.5 / 1,903.1 - 1 = -8.2%, about 8%; average diluted shares 1,873.1 / 3,007.7 - 1 = -37.7%, about 38%. Market value over tangible common equity at year end ($bn): 2018 127.14 / 151.078 = 0.84; 2019 174.42 / 148.809 = 1.17; 2020 128.37 / 153.389 = 0.84; 2021 119.83 / 157.077 = 0.76; 2022 87.60 / 158.151 = 0.55; 2023 98.45 / 164.025 = 0.60; 2024 133.13 / 167.698 = 0.79; 2025 208.79 / 169.618 = 1.23. Trailing twelve months to June 2026: net income 14,306 - 8,083 + 11,616 = 17,839; revenue 85,225 - 43,264 + 49,399 = 91,360; diluted EPS 6.99 - 3.92 + 6.21 = 9.28; P/E 225,250 / 17,839 = 12.6; P/S 225,250 / 91,360 = 2.47. Year-end P/E and P/S (market value over net income and revenue): 2015 154.16 / 17.242 = 8.94, 154.16 / 77.277 = 1.995; 2016 169.36 / 14.912 = 11.36, / 70.797 = 2.392; 2017 196.74 / 73.693 = 2.670 (net loss); 2018 127.14 / 18.045 = 7.05, / 74.036 = 1.717; 2019 174.42 / 19.401 = 8.99, / 75.067 = 2.324; 2020 128.37 / 11.047 = 11.62, / 75.501 = 1.700; 2021 119.83 / 21.952 = 5.46, / 71.574 = 1.674; 2022 87.60 / 14.845 = 5.90, / 74.982 = 1.168; 2023 98.45 / 9.228 = 10.67, / 78.066 = 1.261; 2024 133.13 / 12.682 = 10.50, / 80.722 = 1.649; 2025 208.79 / 14.306 = 14.59, / 85.225 = 2.450. More: end-of-period deposits 1,493 / 1,403.6 - 1 = 6.4%, about 6%; Markets average loans 176 / 794 total loans = 22.2%, about 22%; JPMorgan deposit-cost gap 2.72 - 1.70 = 1.02 points (2023), 3.06 - 2.08 = 0.98 points (2024), about 1.0 point; Bank of America non-interest-bearing share 514,477 / 1,984,182 = 25.9%, about 26%; Services old-basis average deposits 935 / 1,422 = 65.8%, about 66%; AO Citibank assets 13.5 / 2,657.2 = 0.51%, about 0.5%; loss 1.2 / 13.5 = 8.9%, about 9%. Card partners against the card segment: 10,227 / 18,258 = 56%, more than half. Return improvement to target: 14.5 - 8.8 = 5.7 points, roughly six. Forecast extrapolation: 2026 revenue 49,399 x 2 = 98,798; 2026 EPS 134.28 / 11.58 = 11.60; revenue growth (85,225 / 78,066)^(1/2) - 1 = 4.5% a year. — FY2015-Q2 2026 · publ. September 2026 · source ↗
    Method: Arithmetic on figures reported in Citigroup's Forms 10-K and 10-Q, JPMorgan's and Bank of America's Forms 10-K, and market data from stockanalysis and companiesmarketcap; operands shown in the source line.
  7. ReportedCiti's Investor Day put spread-financing loans growing about 14% a year from 2022 to 2025 and targets mid-teens annual growth in the near term.
    Citigroup 2026 Investor Day financial overview presentation - RoTCE targets, business targets for Services, Cards and Markets, efficiency ratio, transformation, liquidity and capital. — May 2026 · publ. May 2026 · source ↗
  8. ReportedThe allowance on Markets loans was 0.86% of loans in the first quarter of 2024 and 0.67% at the end of 2025, while net credit losses were 0.15% of loans in 2025.
    Citigroup Historical Quarterly Financial Data Supplement 2021-2025 recast to the first-quarter 2026 segments - Markets and Banking: revenue by product and region, investment banking fees, income, capital and returns. — FY2021-FY2025 · publ. 3 April 2026 · source ↗
  9. ReportedThe allowance on Markets loans was 0.86% of loans in the first quarter of 2024 and 0.67% at the end of 2025, while net credit losses were 0.15% of loans in 2025.
    Citigroup Historical Quarterly Financial Data Supplement 2021-2025 recast to the first-quarter 2026 segments - Markets and Banking: revenue by product and region, investment banking fees, income, capital and returns. — FY2021-FY2025 · publ. 3 April 2026 · source ↗
Sources
Generated September 28, 2026