Citi Group has raised concerns about Australia’s Insignia Financial (ASX:IFL) after the company warned of increased costs related to cyber security and governance in its fiscal 2023 results.

On Thursday, the financial services provider fell sharply, posting a nearly 17% drop in its full fiscal year net profit after tax, which amounted to A$194.9 million.

Citi states that facing added expenses and declining revenue, also known as ‘negative jaws’, it’s difficult to foresee the company maintaining profitability.

The bank predicts Insignia will record a statutory loss in FY24 and only a minor profit in FY25.

The forecast also includes a mere 1% growth in the core profit in FY24, indicating another year of dwindling operating profit margins.

Moreover, Citi has adjusted its fiscal 2024 earnings per share estimate, reducing it by 6%, and suggests that the present financial year may be another stagnant period for the company.

Despite these challenges, Citi upholds a ‘neutral’ stance on the stock, albeit with a lowered price target of A$2.50.

Among ten analysts, seven rate the stock as ‘buy’ or higher and three suggest ‘hold’, with a median price target of A$3.50 – according to Refinitiv data.

Following these developments, Insignia Financial’s stock has declined by 22.1% this year, as stated in the most recent closing figures.

Insignia Financial (ASX:IFL) is a leading provider of financial services in Australia.