Citi CEO Jane Fraser says the firm's wealth management unit gained traction in the third quarter while acknowledging the overall firm is not yet "where we want to be."
In an earnings call on Tuesday, Fraser pointed to the wealth unit's 9% year-over-year increase in revenue as a sign that recent firmwide changes to Citi's various business lines are starting to have their intended effects. Citi's net revenue from wealth management came to more than $2 billion in the third quarter.
"In wealth, we saw a sizable increase in client investment and flows. We brought expenses down while continuing to invest in our transformation and businesses," Fraser said. "And we continued to attract the top leaders in the industry and successfully combined them with our own teams in banking and wealth. So while we are not yet where we want to be, the impact of the changes we're making is clearly evident in our momentum and our improving performance."
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Much of Citi's ambitions for its wealth unit have been hung on Andy Sieg, a former Merrill executive hired by Citi last year. Sieg, who officially started in September 2023, has spent part of his time on the job so far surrounding himself with a team of fellow industry veterans.
Some of those hires have gone better than others. Don Plaus, a former Merrill colleague whom Sieg brought on to oversee Citi's private bank, left after a mere four months.
On the other hand, Citi has brought on Ketih Glenfield, another former Merrill executive, to oversee the wealth unit's investment solutions team; and Dawn Nordberg, formerly of Morgan Stanley, to promote client referrals between Citi's wealth and banking divisions.
Fraser said the emphasis Sieg has placed on the firm's investments helped increase client assets by 24% year over for the quarter. Citi reported $580 billion in investment assets at the end of the quarter, a total which includes assets held in trust and in custody.
"I think the first piece was putting the pieces of the global wealth organization together, and now we're focused on positioning for growth and reshaping the business to deliver the returns that we all expect," Fraser said.
Chief Financial Officer Mark Mason noted that expenses for the wealth unit were down 4% to $1.6 billion for the quarter. That was driven by the "continued benefit of headcount reductions as we right-size the workforce and expense base," he said.
Citi has recently embarked on a massive overhaul of its internal structure, reorganizing itself along five lines of business: trading, banking, services, wealth management and U.S. consumer offerings. It is also reducing its layers of management to eight in number from 13.
Amid those changes, the firm predicted it would shed 5,000 jobs by March this year and an additional 15,000 by the end of 2026. A Citi spokesperson declined to say how many positions have been cut in wealth management.
Revenue and net income
Of Citi's more than $2 billion in wealth revenue for the third quarter, the bulk came from its Citigold offering for clients with an average monthly balance of at least $200,000. Just over $1.1 billion of that was from Citigold, a figure up 17% year over year.
Meanwhile, Citi's Wealth at Work offering, which provides services to law firms and professionals of various stripes, saw its revenue increase 4% year over year to $244 million. And the firm's private bank, which works with wealthy clients, reported $614 million in revenue for the quarter, a figure essentially unchanged from the previous year.
The increases came partly from $1.2 billion in net interest income, which was up 6% year over year. Citi also reported a 15% year-over-year increase in fee revenue, which rose to $590 million.
Citi reported generating $283 million in net income on those revenues. That figure was up 114% year over year.
Assets
Citi's $580 billion in investment assets for the third quarter were up 24% year over year. The firm's total client balances were up 14% to just over $1 trillion.
Those increases were driven by $9 billion in net assets inflows in the quarter. That figure was up by 267% year over year.
Comment
Fraser said in the earnings call that a big part of Citi's wealth plan is to add to its tally for client investment assets under management.
"We had 24% growth in client investment assets this quarter. I would call that a good start to realizing the potential that we have here," Fraser said. "And at the same time, Andy [Sieg] continues to right-size our expense base and drive productivity. Our advisor productivity increased over 50% in Citigold North America. So a number of different areas that he's focused on so that we can continue to grow the investment space, including some important new talent that we've been bringing in, that I'm sure you've noticed."
