Citi Sets Financial Goals for 2015 - Analyst Blog
March 06 2013 - 5:10AM
Zacks
On Tuesday, at an investor conference in Boston, Mike Corbat,
the new chief executive officer (CEO) of Citigroup
Inc. (C), came up with financial targets for the company,
set to be achieved by 2015. Moreover, the CEO announced
restructuring initiatives for the markets where Citi is operating
its business.
Corbat aspires to earn return of 10% on tangible common equity in
2015, up from 7.9% earned in 2012. Moreover, return on assets is
expected in the range of 0.9% – 1.1%, up from 0.62% in 2012,
adjusted for certain items. Specifically, at Citicorp, efficiency
ratio is aimed to be improved to mid–50%.
The CEO is hopeful of achieving the financial goals driven by
revenue growth at a low single-digit rate. Further, efficiency
improvements and continuous shedding of troubled assets at Citi
Holdings’ unit is required to reach the target.
Citi operates in a number of markets worldwide. Therefore, Corbat
has planned to restructure, reduce or exit some of the operations
in 21 markets globally to enhance returns. These markets include
Citi’s business operations through which the company records less
than 10% of total revenues and earns less than 0.4% of assets.
Though names of such markets were undisclosed, but it was intimated
that most of them involve consumer businesses. Notably, in Dec
2012, Citi announced its plan to exit consumer businesses in
Uruguay, Paraguay, Turkey, Romania and Pakistan.
Further, in another 18 markets where Citi operates including United
States and the United Kingdom, Corbat aims to optimize the
operations to induce growth in revenues. Currently, from such
markets, Citi earns only 0.7% on assets and records 55% of total
revenues, excluding Citi Holdings.
An additional 20 markets have been identified by the company where
Corbat plans to invest more for growth. These markets include
emerging economies such as in Mexico, Singapore, India, Hong Kong
and China and earn 1.9% on assets currently.
Finally, a group of 48 markets are categorized where Citi provides
transaction processing operations to corporate clients. In these
markets, Corbat perceives more opportunistic business but plans to
"stay the course." Moreover, these markets are the most profitable
for Citi, recording a gain of 2.5% on assets.
Therefore, with the ambition of achieving financial targets in 2015
by restructuring the business, Corbat aims to provide clients with
products globally. Streamlining of operations and efficiency
improvements would aid Citi to accomplish its goals within the
stipulated time.
Currently, Citi holds a Zacks Rank #3 (Hold). Among peers,
BankUnited Inc. (BKU) holds a Zacks Rank #1
(Strong Buy), while Fifth Third Bancorp (FITB) and
State Street Corporation (STT) retain a Zacks Rank
#2 (Buy).
BANKUNITED INC (BKU): Free Stock Analysis Report
CITIGROUP INC (C): Free Stock Analysis Report
FIFTH THIRD BK (FITB): Free Stock Analysis Report
STATE ST CORP (STT): Free Stock Analysis Report
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