Fri. Jan 21st, 2022

Citigroup is scrapping its global consumer banking division and revamping its business structure to reflect CEO Jane Fraser’s withdrawal from international retail banking.

Starting this year, Citigroup will report results of personal banking services in the US and global wealth management, dropping the global consumer banking line that appeared in its earnings releases every quarter since 1999.

The restructuring was announced along with higher-than-expected earnings in the fourth quarter, and only hours after Citigroup said it sold four consumer banking franchises in Southeast Asia to Singapore’s United Overseas Bank. Citigroup announced its intention to leave its business earlier this week Mexico consumer business.

For the last quarter of 2021, Citigroup reported a profit of $ 3.18 billion, or $ 1.46 per share, down from $ 4.3 billion, or $ 1.92 per share, a year earlier. Profits have been hurt by the cost of consumer exit in Asia and efforts to bolster the bank’s infrastructure to appease regulators.

Analysts polled by FactSet predicted earnings of $ 1.39 per share.

The changes confirm Fraser’s “strategic refresh” of the fourth-largest U.S. borrower by assets, whose shares have outperformed those of Wall Street counterparts for years.

Line chart of Weekly Price data since January 2017 showing that Citi's share was behind peers

Fraser starts making drastic changes even before he officially took over as CEO last February. Her bravest performance so far has focused on the consumer bank, which has been an internal point of contention for years due to its persistently low returns.

In April, it announced that Citi would place most of its international consumer businesses offered for sale in an effort to free up capital that can be redeployed more profitably in other parts of the business.

The division, which Fraser managed for one year before being promoted to the top job, accounted for approximately 44 percent of revenue and 29 percent of profit in 2019.

Performance in the consumer bank continued to weigh on Citi’s results in the most recent quarter. Group revenue rose 1 percent to $ 17 billion as a 6 percent decline in consumer bank revenue countered a 4 percent increase in institutional customer business.

The planned retirement will relax the collection of global franchises that former CEO Sandy Weill built up in the early 2000s, which analysts say is now a diverse group of businesses. Subsequent CEOs have tried to get rid of some poorly performing consumer businesses, but analysts said they were encouraged by the pace and scope of Fraser’s actions.

“Jane Fraser puts an end to a failed 50-year vision,” Wells Fargo bank analyst Mike Mayo said when the sale was announced last year.

Citi’s withdrawal to its local market follows a broader withdrawal by global banks. Last year, HSBC sold its US retail business and gave up on its 40-year effort to run a full-service bank in the country.

The global retail banking model was based on the assumption that banks could effortlessly serve a high-end consumer who regularly travels around the world for work and vacations, but that “global consumer customer has never materialized,” Mayo said.

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