Since Citigroup’s demise during the 2008 recession, the stock has been in a lurch.
In response, Citigroup CEO Jane Fraser proposed a daring change in the business plan, focusing even more on wealth management.
However, Citigroup’s investment in wealth management hasn’t started to pay off despite the change in strategy.
Since the company’s demise during the 2008 financial crisis, shares of Citigroup have fallen more than 30% during the past five years.
As a result, Jane Fraser, the CEO of Citigroup, made a drastic change in the company’s strategy, and since April 2021, it has left 14 consumer markets outside of the US.
Hugh Son, a financial correspondent for CNBC, stated: “What’s been obvious to analysts for a long time is that Citi had become too unwieldy and too big to manage.” Ultimately, there weren’t many synergies between many of the diverse overseas sections.
Citigroup instead announced its plans to divert resources and double down on wealth management. It’s a tactical move that several other major banks like Bank of America and Wells Fargo have adopted in recent years.
According to Mike Mayo, a senior banking analyst at Wells Fargo Securities, “it offers high returns and it creates growth opportunities in regions that are in the early stages of wealth generation like Asia and the Middle East.” Additionally, because there is less chance for major accidents, the regulatory treatment is better.
However, Citigroup’s investment in wealth management hasn’t yet begun to pay off despite the change in strategy. Global wealth management was projected by the company to achieve a compound annual revenue growth in the high single digits to low teens in 2022.
However, in the second quarter of 2023, Citigroup’s wealth management revenue decreased 5% year over year.
The success of Citigroup remains to be seen, according to Mayo. “I’m dubious about Citi’s strategy when it comes to their global payments, banking, or markets businesses, even though I’m more optimistic about it. The effectiveness of this wealth management method remains to be shown, in my opinion.
For this story, Citigroup declined to send a representative for CNBC to speak with.
To learn how Citigroup is preparing for its comeback, watch the video above.