Morgan Stanley researchers show that Citigroup has come back in a big way, beating out Goldman Sachs, JP Morgan and Bank of America

But even amid the surge, longtime under-performer Citigroup stands out from the other banks. First, it beat Morgan’s 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’s been trapped between about $30 in April 2009 and $81 in January 2020, leading to reports that other banks regarded Citi as a “laughingstock.”

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’s accomplishment was difficult to appreciate until now. Among the other money center banks, Citi’s closest competition was Goldman Sachs, which beat Morgan’s price target by 11%, compared to Citi’s 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’s analysts expect they will continue to beat the market. Only super-regional bank US Bancorp came close to Citi’s price target growth, beating its target by 15%.

“Our results show the progress we are making in executing our strategy and the benefit of our diversity business model,” 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’s stock has nearly doubled to $65.83.

So how did Fraser pull off the turnaround? A closer look at Citi’s recent earnings reports helps to paint the picture.

The largest single contributor to Citi’s net income was its markets revenue—including 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 corporate transaction in May contributed to Citi’s $1.5 billion in equity markets revenue, a 37% increase over the same quarter last year.

Citi’s fastest growing section was banking, which increased revenues 38% to $1.6 billion. Nearly all that growth—$853 million worth—came 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.

Citi’s services revenues also played a role in its strong quarter—including Treasury and Trade Solutions—which 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 Australian diversified securities firm Fiducian Group, with $8.5 billion assets under management.

As Fortune reported in June, Citi was the best performing money center bank in the Fed’s 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 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.

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’s 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%, “the highest level ever,” according to the report, resulting in $157 billion in excess regulatory capital just waiting to be deployed. “We expect buybacks to increase in the back half of the year.”