Citi 2023 Q2 earnings show wealth management struggles

Citi earnings show struggles with wealth management ambitions

July 17, 2023 3:36 PM

Citigroup has yet to see a big payoff from its decision to emphasize its wealth management business as it winds down its consumer banking operations in 14 markets in Europe, Asia and other parts of the world.

Cit's global wealth management division reported a 5% year-over-year decrease Friday in its revenue for the second quarter, which came in at $1.8 billion. The results were pushed down by lower collections of investment fees and higher interest paid on deposits, the firm said in a news release.

The firm's headcount for wealth managers — including people with the title of banker, financial client advisor, relationship manager and investment counselor — also dipped slightly. It reported 2,839 employees with those job descriptions in the second quarter, down from 2,875 in the first quarter and 2,866 in the fourth quarter.

Mark Mason, Citi chief financial officer, said the firm is making progress with its plans to transfer clients from its retail banking business to its wealth management unit. He said Citi wealth managers had received 25,000 such referrals through May, an 18% year-over-year increase.

"While there's clearly more work to do in wealth, we are seeing good momentum in the underlying drivers," Mason said.

Citi added to its wealth management ambitions with its announcement last August that it planned to hire 500 advisors for the Wealth at Work unit. The firm is also bringing back wealth management heavyweight Andy Sieg to lead its global wealth division in September after Sieg spent 13 years at Merrill, Bank of America's wealth management division.

Citi's second-quarter results came the same day as two of its rivals reported mixed results for the period. JPMorgan Chase saw a strong boost from its wealth management division, while Wells Fargo's wealth unit underperformed.

For the highlights from Citi's second-quarter results, scroll down. For its first-quarter figures, click here.

Revenue by unit

The private bank reported $605 million in revenue — out of $1.8 billion total from the firm's wealth management divisions. That's a 23% year-over-year decrease. Mason said "investment fee headwinds and higher deposit costs" weighed heavily on the private bank's results.

Meanwhile, the Wealth at Work unit's revenue rose nearly 32% year over year to $224 million. Mason said that result was driven largely by mortgage lending.

Separately, Citi's Citigold unit, which serves clients with as much as $10 million in assets, saw a nearly 2% decrease to $974 million in revenue for the quarter.

Clients by the numbers

The number of newcomer clients working with the firm's private bank, which caters to the affluent, was up 40% year over year, Mason said during the earnings call. And its Wealth at Work unit, which specifically serves lawyers, private equity officers and similar professionals, saw a nearly 60% increase in its new client count, Mason said.

A Citi spokesman said the firm has not provided client totals since its Investor Day event in February 2022. Citi then reported having 75 million customers for both its wealth management and personal banking divisions.

Remark

In the earnings call Friday, Citi CEO Jane Fraser acknowledged the 5% decline in the wealth management unit's revenues.

"However, we have seen activity pick up a bit in Asia for two quarters with growing net new assets," she said. "Referrals from the U.S. retail banks are increasing, and globally, new client acquisition in the private bank and Wealth at Work has grown significantly on the back of our investments in our network of client advisors and bankers."

Citi earnings show struggles with wealth management ambitions

Revenue by unit

Clients by the numbers

Assets

Remark