By Orla McCaffrey
Citigroup Inc. is shutting down most of its consumer-banking
operations in Asia, Europe and the Middle East, the latest sign
that the original financial supermarket is rethinking how to do
The bank on Thursday also reported a sharply higher
first-quarter profit, though that was largely because its year-ago
results were hammered by pandemic preparations. Citigroup posted a
profit of $7.9 billion, or $3.62 a share, well above the $2.60 a
share forecast by analysts polled by FactSet. A year earlier,
Citigroup had reported a quarterly profit of about $2.5 billion, or
$1.05 a share.
The New York bank also said it would exit its consumer
operations in 13 countries, mostly across Asia, to focus on wealth
management and other businesses.
For Jane Fraser, who took over as chief executive officer last
month, the change marks one of her first big moves at the bank's
helm. Ms. Fraser said in a statement that those consumer banks were
excellent businesses, but "we don't have the scale we need to
compete." She said Citigroup would continue to invest in wealth
management and in the businesses that work with corporate clients
The Citigroup of today was created in 1998, a merger of the
consumer-focused Citicorp and the highflying Wall Street bankers at
Travelers Group. The company became the world's largest
financial-services firm, and executives envisioned a one-stop shop
where globe-hopping travelers could always find a Citi ATM.
But Citigroup's businesses continued operating as silos, and the
imagined merger benefits didn't materialize as hoped. The bank
nearly collapsed in the 2008 financial crisis under the weight of
risky mortgage securities, and it has been slimming down since
then. Ms. Fraser's predecessor jettisoned consumer banking
operations in parts of Latin America.
Now, Citigroup is a giant on Wall Street, but it is relatively
small in U.S. consumer banking, a combination that some analysts
and investors have criticized. The bank has lagged behind rivals in
some key metrics like long-term stock growth. And despite its large
Wall Street operations, its results Thursday showed parts of its
investment banking and trading units falling behind rivals like
Goldman Sachs Group Inc. and JPMorgan Chase & Co.
Ms. Fraser said in January that the bank would restructure the
businesses that manage money for wealthy customers, with the goal
of getting to clients earlier and keeping them as they grow richer.
The bank said Thursday that it will operate consumer banking in
four "wealth centers" where it expects strong growth for the
wealth-management business: Singapore, Hong Kong, the United Arab
Emirates and London.
Citigroup's brand in some overseas markets is strong, but the
consumer banks there are relatively small and costly. Revenue from
the operations the bank is winding down accounted for about $4
billion of Citigroup's 2020 revenue of roughly $74 billion. Their
expenses totaled about $3 billion, compared with 2020 total
expenses of about $43 billion.
"We're looking to be very clinical in looking at the businesses
that we want to retain and where we can secure leading market
positions," Chief Financial Officer Mark Mason said on a call with
In the first quarter, Citigroup's total revenue fell 7% to $19.3
billion. That was still ahead of the $18.8 billion analysts had
During the same period a year ago, the coronavirus pandemic was
taking hold in the U.S., and big banks including Citigroup set
aside billions of dollars to prepare for potentially bad loans.
The reserves weighed on earnings for much of last year, but the
big loan losses so far haven't materialized, thanks in part to
government stimulus measures that have kept the economy afloat.
Banks' first-quarter results have soared partly because their
year-earlier results were hit so hard by the rainy-day
Citigroup released $3.85 billion in reserves, a major driver of
its first-quarter earnings. The bank released $1.5 billion in the
A crazy quarter in markets, marked by a boom in special-purpose
acquisition companies and stock-market records, helped power other
big Wall Street banks. JPMorgan and Goldman Sachs both reported
record quarterly profits on Wednesday.
Citigroup didn't catch all the same waves. It enjoyed a 46% jump
in investment-banking revenue, largely from a surge in underwriting
new initial public offerings, SPACs and other sales of stock.
But Citigroup's revenue from advising companies on deals was
down, while its competitors at JPMorgan, Goldman and Bank of
America Corp. all notched gains.
Citigroup's trading revenue was essentially flat, rising 1%.
Trading revenue rose 47% at Goldman and 25% at JPMorgan. Adjusted
trading revenue rose 17% at Bank of America.
Mr. Mason said lingering economic uncertainty among corporate
clients, coupled with high liquidity levels, weighed on the firm's
Wall Street operations.
"Going forward, I think the clients agree that the recovery and
growth will be asynchronous," Mr. Mason said. "And they, too, are
looking at many of the same signs that we've talked about, in the
way of signals for recovery."
Expenses increased 4% to $11.1 billion, in part because of the
bank's effort to revamp its risk and control systems. Investors
have been watching that line closely after regulators ordered
Citigroup to make significant changes in its risk system.
Earnings in the institutional clients group, which includes
investment banking and trading, rose 64% to $5.9 billion, but
revenue fell 2% to $12.2 billion.
The consumer bank reported a profit of $2.2 billion, compared
with a loss a year earlier of $740 million. But revenue fell 14% to
Citigroup shares fell slightly on Thursday, but they have risen
about 18% since the beginning of the year. The KBW Nasdaq Bank
Index, which tracks shares of the largest lenders, is up 26% so far
this year, compared with a 10% gain in the S&P 500.
Write to Orla McCaffrey at firstname.lastname@example.org
(END) Dow Jones Newswires
April 15, 2021 12:54 ET (16:54 GMT)
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