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Stock prices at many of the largest banks in America\u2014called \u201cmoney center banks\u201d for their roll financing governments, large corporations, and other banks\u2014are eclipsing their non-banking peers, according to a Morgan Stanley<\/a> report shared with Fortune<\/em>. Last quarter, two-thirds of them beat the S&P 500, an index tracking the best performing large cap stocks in the U.S. Trading and investment banking revenues at Bank of America<\/a>, Citi, Goldman Sachs<\/a>, and JPMorgan all beat Morgan\u2019s price targets\u2014and with capital markets just starting to break away from three-decade lows, the good news is likely only just beginning.<\/p>\n But even amid the surge, longtime under-performer Citigroup<\/a> stands out from the other banks. First, it beat Morgan\u2019s price target by a whopping 20%, increasing from $66 to $79. Second, and perhaps most importantly, it has the DNA of a great American bank, but for the past 15 years has performed like a mediocre regional one. After falling from a high of $550 in May 2007 it\u2019s been trapped between about $30 in April 2009 and $81 in January 2020, leading to reports<\/a> that other banks regarded Citi as a \u201claughingstock.\u201d<\/p>\n While Citi published its quarterly report earlier this month, showing net income of $3.2 billion, or $1.52 per diluted share, the true scale of the bank\u2019s accomplishment was difficult to appreciate until now. Among the other money center banks, Citi\u2019s closest competition was Goldman Sachs, which beat Morgan\u2019s price target by 11%, compared to Citi\u2019s 20% beat, and Bank of America, which beat the target by 7% and JPMorgan, which beat it by 2%. All four banks were overweight, meaning Morgan\u2019s analysts expect they will continue to beat the market. Only super-regional bank US Bancorp<\/a> came close to Citi\u2019s price target growth, beating its target by 15%.<\/p>\n \u201cOur results show the progress we are making in executing our strategy and the benefit of our diversity business model,\u201d Citi CEO Jane Fraser said in a statement accompanying the investor note. After working at the bank for 16 years, Fraser was appointed CEO in March 2021, when the stock was valued at $38. Since October 2023, Citi\u2019s stock has nearly doubled to $65.83.<\/p>\n So how did Fraser pull off the turnaround? A closer look at Citi\u2019s recent earnings reports helps to paint the picture.<\/p>\n The largest single contributor to Citi\u2019s net income was its markets revenue\u2014including revenue from fixed-income markets. Markets revenues increased 6% to $5.1 billion, driven largely by growth in its equity markets revenues. A $400 million gain from a Visa<\/a> corporate transaction<\/a> in May contributed to Citi\u2019s $1.5 billion in equity markets revenue, a 37% increase over the same quarter last year.<\/p>\n Citi\u2019s fastest growing section was banking, which increased revenues 38% to $1.6 billion. Nearly all that growth\u2014$853 million worth\u2014came from investment banking revenues, which increased 60%, in large part from debt capital markets growth, benefiting from an increase in investment grade assets. The broader debt capital markets brought in $1.36 trillion over the first half of 2024, a 45% increase over the same period last year, according to PwC data.<\/a><\/p>\n Citi\u2019s services revenues also played a role in its strong quarter\u2014including Treasury and Trade Solutions\u2014which were up 3% to $4.7 billion. Leading that growth was securities services revenues that increased 10% to $1.2 billion. That increase was in turn impacted by a 14% growth in net interest income driven by higher deposit spreads, and a 7% increase in non-interest revenue, especially from increased assets under custody and administration. In April Citi signed<\/a> Australian diversified securities firm Fiducian Group, with $8.5 billion assets under management.<\/p>\n As Fortune<\/em> reported<\/a> in June, Citi was the best performing money center bank in the Fed\u2019s annual stress test designed to see if the banks had enough capital to withstand a financial crisis. Bank of America estimates the extra buffer would free up $3 billion to deploy<\/a> towards share buy-backs. Citi CEO Jane Fraser said the bank was increasing its dividends by 6% as a result of the excess buffer. The Morgan Stanley report out today further elaborates on the impact of that extra cushion.<\/p>\n The report shows that, while Citi is leading the way among large banks, its excess capital is part of a larger trend of banks sitting on record levels of the funds. Morgan\u2019s researchers say those funds will supercharge future earnings. On a weighted average basis, the capital covering large cap bank earnings moved up 20 bps to 12.7%, \u201cthe highest level ever,\u201d according to the report, resulting in $157 billion in excess regulatory capital just waiting to be deployed. \u201cWe expect buybacks to increase in the back half of the year.\u201d<\/p>\n<\/div>\n\nRecommended Newsletter: <\/strong>CEO Daily provides key context for the news leaders need to know from across the world of business. Every weekday morning, more than 125,000 readers trust CEO Daily for insights about\u2013and from inside\u2013the C-suite. Subscribe Now<\/a>.<\/div>\n