The Risky Gamble of Citigroup’s Move towards Wealth Management

Since the 2008 recession, Citigroup’s stock has continuously struggled, with shares falling over 30% in the past five years.

In response, Jane Fraser, CEO of Citigroup, has announced a bold shift in company strategy, leading to the exit from 14 consumer markets outside of the United States since April 2021.

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“Citi had become too unwieldy and too big to manage,” said Hugh Son, a banking reporter at CNBC. “The overseas operations lacked synergies, making it an obvious problem to analysts.”

Citigroup has decided to focus its resources and double down on wealth management instead. This strategic move aligns with the approaches taken by other major banks like Bank of America and Wells Fargo over the past few years.

“Wealth management provides high returns and growth opportunities in emerging wealth-generation regions like Asia and the Middle East,” stated Mike Mayo, a senior banking analyst at Wells Fargo Securities. “It also carries lower risks, resulting in more favorable regulatory treatment.”

However, Citigroup’s investment in wealth management has yet to yield positive results. In 2022, the firm anticipated high single-digit to low double-digit annual revenue growth in global wealth management.

Unfortunately, Citigroup’s wealth management revenue dropped by 5% year over year in the second quarter of 2023.

“The success of Citigroup’s wealth management strategy remains uncertain,” commented Mayo. “While I am optimistic about Citi’s strategy for their global payments, banking, and markets business, the outcome of their wealth management strategy is yet to be determined.”

Citigroup declined CNBC’s request for an interview.

Watch the video above to learn more about Citigroup’s comeback plans.