Dive Overview:
In an investor presentation on Tuesday, Citi executives sought to highlight the bank’s services business, which CEO Jane Fraser called the bank’s “crown jewel.”
The services division, one of five new businesses introduced in Citi’s major shakeup, includes liquidity management services, payments, trade and working capital solutions and securities services. It accounted for about half of the bank’s profits. First QuarterCiti is facing pressure from investors to follow through on its restructuring plan, and executives have stressed the importance of the unit to the bank’s overall performance.
Still, the New York City-based bank expects revenue growth in its operations to slow in the near term. Its services division is expected to generate low- to mid-single-digit annual revenue growth over the next few years, and “This is a downside relative to past years,” Piper Sandler analyst Scott Seifers said in a client note.
Dive Insights:
Executives reiterated that the business, which helps some 19,000 clients around the world manage and move their money, is core to Citi’s strategy.Fraser said Tuesday that the unit’s treasury and trade solutions “often serve as a gateway for mid-market clients to other parts of the firm.”
Built over decades, the bank’s network spans 95 countries and serves clients with nearly $5 trillion in funds every day.
“We are committed to being the preeminent banking partner to institutions with cross-border needs,” Fraser said.
The event, which focused on investments to drive service businesses and innovation, was part of Citi’s larger transformation. Thousands of jobs cut As part of Simplification In bank structuretogether Withdrawal of consumer business Outside the United States
Shahmir Khaliq, head of services at Citi, noted that the company’s recent growth has been supported by a rising interest rate environment. He said revenue from the service reached $18.1 billion last year, growing at a 20% annual rate from 2021 onwards.
Kalik argued that the division’s global network, which allows multinational clients to process cross-border transactions through a single platform, is the basis of the bank’s competitive advantage. On top of that, the bank is focusing on further investments to drive innovation and integration across product lines to make the process smoother for clients.
Citi has 10% institutional market share for its treasury and trade solutions, more than any of its peers, while its securities services market share is fourth at 8.9%. He said Citi is targeting opportunities in institutional services for growth, noting that it is seeing more Asia-based clients looking to gain a foothold in the U.S. and Latin America. Citi also sees room to gain share in areas such as healthcare, technology and fintech, Khaliq said.
But Citi’s commercial client market share for treasury and trade solutions is just 0.5 percent, and Citi plans to target commercial clients with cross-border needs, Mr. Kalik said. The bank will likely focus on multi-geography, multi-product clients over the next few years, given its relatively small market share in that area, he said.
“We expect to be able to gain more share going forward as interest rates start to stabilize,” Kalik said.
Mr. Kalik said the bank has been fast-tracking some of its innovations in the space in recent years, noting that Citi has faced competition from fintechs in supply chain finance and lost business, so the improvements are being made to make it more competitive.
Moreover, City continues to make progress. Digital TransformationFraser said executives “recognize that in some areas progress is too slow.”
Chief Financial Officer Mark Mason said this has led the bank to strengthen several initiatives, including regulatory reporting, data and strengthening the bank’s stress testing and resolution planning processes. The Federal Deposit Insurance Corporation downgrading lenders’ data management systems; The Wall Street Journal Report on Monday.
“We continue to be purposeful and disciplined about these investments across our franchise and are committed to making the expenditures necessary to meet our regulatory obligations,” Fraser said.
