Citigroup Chief Executive Jane Fraser is overseeing the bank’s reform, a hallmark of her tenure since her appointment in 2021. Her team has laid off some businesses, cut thousands of jobs and brought in new leadership in an effort to simplify and improve the creditor.
Part of that turnaround could include the sale of its wealth management business, Bank of America equity analysts suggested in a report released Thursday.
“It is in the wealth segment where we see the need for more heavy lifting,” wrote BofA Securities analysts led by Ebrahim Poonawala.
He pointed to factors including its inefficiency as a company – with an abysmal 94% efficiency ratio for fiscal 2023 – and wealth segment synergies and competitive positioning in the industry that he considers uncertain. Companies generally aim to keep efficiency ratios low to reflect that they are investing their capital and resources effectively, with the banking sector average being around 60%.
“While the potential synergies linked to its corporate relationships should be an opportunity,” his team wrote, “they would not be surprised” if management “ends up looking for strategic alternatives, especially if peer-like profitability remains elusive.”
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He also sees this possibility for Citi
in
US consumer card business. A Citi spokesperson declined to comment. Barron’s On thursday.
“Or the current management. improves profitability or the next logical step could be to pursue strategic alternatives that maximize shareholder value,” Poonawala, who has a Buy rating on Citi, wrote on Thursday.
The suggestion comes at a time when Citi exited other units and brought in people from outside to try to improve performance. Abandoning the wealth split or part of it, however, would mean a radical shift from what Fraser described as his vision for Citi’s future.
Shares of Citi, the third-largest U.S. lender by assets, rose 30% last year, surpassing the
S&P 500.
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However, the stock is down 90% from its all-time high in 2006.
The bank abandoned business outside the US, in markets such as Australia, India and Indonesia. Citi also said last year that it had agreed to sell its consumer goods portfolio in China to HSBC.
.
Financial terms of that deal were not disclosed, but the deal represented $3.6 billion in deposits and assets under management.
Last year, Citi hired Andy Sieg, the former head of Bank of America’s vast Merrill Lynch wealth management business, as head of wealth management. Investors will soon be able to hear updates on his progress: Sieg is scheduled to present at a financial conference hosted by Morgan Stanley on June 12. Sieg was a wealth executive at Citi from 2005 to 2009.
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“This is a time of massive global wealth creation and our franchise is uniquely positioned to do so. Andy will ensure we are at the forefront of what is happening around the world,” Fraser told analysts last October. She said the company is “not satisfied with our performance over the last few years, but this will be a very important factor for us.”
In April, Fraser said that while income in terms of wealth declined in the first quarter, the business increased fee-based income and gathered about $22 billion in net new assets last year.
Outsiders like Sieg and Vis Raghavan, who recently joined Citi as head of banking after running global investment banking at JPMorgan Chase
,
They could take a “no sacred cows” approach to fixing the bank, Poonawala wrote — taking impartial actions as they come from successful outside companies. Poonawala sees this as a positive thing.
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BofA analysts said one corporate example that offers a model for what Citi could embark on is the dismantling of General Electric under Larry Culp, who is now the CEO of GE Aerospace.
Fraser’s bio on the Citi website mentions that she is committed to making Citi a “global leader in wealth management.” Investors will be watching for updates on how exactly his team executes this vision.
Write to Rebecca Ungarino at rebecca.ungarino@barrons.com
