Citi’s trading income disappoints, CEO details changes

(Bloomberg) – Citigroup inc. offered a stark reminder of the unpredictability of trading, recording a steeper-than-expected drop in revenue from those operations, just as new CEO Jane Fraser embarks on a shakeup to show more stable units.

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Revenue from managing fixed income products fell 20% in the fourth quarter from a year earlier, worse than analysts estimated, and fell 3% in the equity segment despite projections that they would increase the same percentage. The surprises came as Fraser unveiled changes to the bank’s structure, giving investors a clearer view of the divisions that handle the money of the rich and companies, where the company intends to grow.

The restructuring reveals Fraser’s vision for America’s third-largest bank after months of selling parts of the company around the world. It combines the US consumer and global wealth arms into a single division, divides its institutional operations into three main components, and creates a new unit called “legacy franchises” for assets and operations for sale. Analysts had called for some of the changes, arguing that it was too difficult to measure progress within some parts of the company.

“This will make it easier for our investors to understand the performance of our core businesses and optimize the businesses we have decided to abandon,” Fraser said in a statement released Friday, announcing the financial results and changes.

Revenue grew 1% in the quarter, just below analysts’ expectations. In addition, costs increased due to one-time charges for the liquidation of retail operations in South Korea and the exit of those businesses elsewhere in Asia. Net income amounted to $ 3.17 billion, below analyst estimates compiled by Bloomberg.

Consumer banking revenue in North America fell 6% in the quarter, impacted as customers borrowed less from Citigroup-branded cards.

One bright spot was investment banking, where revenue increased 43% to $ 1.8 billion, with more than a doubling of advisory revenue. Mergers and acquisitions have been booming on Wall Street as companies are restructuring their businesses amid the pandemic.

Fraser, who took office in March, has been scaling back remote consumer operations and examining the bank’s presence in markets around the world. You are focusing on ensuring that your businesses collaborate with each other, for example with wealth units, persuading entrepreneurs to take their corporate accounts to the bank, or their businesses to their investment bankers. The idea is to create a more agile company that can chart constant growth.

Citigroup announced this week one of its most spectacular moves: a plan to abandon a huge consumer banking network in Mexico. This underscores the company’s estrangement from regional retail units. On Thursday afternoon, it announced that it agreed to sell the retail operations in Indonesia, Malaysia, Thailand and Vietnam to United Overseas Bank Ltd. for about 4.9 billion Singapore dollars (US $ 3.6 billion).

As part of the reorganization, New York-based Citigroup will merge the remaining consumer operations into a personal banking and wealth management division, according to a separate filing the bank released Friday. This will include the US retail banking and credit card divisions, as well as the private banking and wealth management branches.

The institutional client group will be divided into three areas: a trading division, a corporate and investment banking and services group, which includes the extensive business of treasury and commercial solutions, as well as securities services.