Wealth unit sale an option for Citi, suggests BofA report

As the turnaround efforts at Citi continue under the leadership of CEO Jane Fraser, including layoffs, restructuring, and new executive hires, a new report from Bank of America proposes it could consider selling off its wealth business as a “strategic alternative.”

“The wealth segment is where we see the need for the most heavy lifting,” wrote the authors of the report BofA securities led by Ebrahim Poonawala.

The report published Thursday highlighted the inefficiency of Citigroup's wealth management business, pointing to its 94 percent efficiency ratio for the 2023 fiscal year. This ratio, significantly higher than the banking industry average of around 60 percent, suggests that the division is not utilizing its resources effectively.

The authors of the report also expressed tempered uncertainty at the wealth arm’s synergies and competitive positioning in the industry.

“While potential synergies tied to its corporate relationships should be an opportunity,” Poonawala's team wrote, they would “not be surprised” if Citigroup’s management “ends up pursuing strategic alternatives, especially if peer-like profitability remains elusive.”

They emphasized that the bank's current management could improve profitability or consider other strategic options to maximize shareholder value.

This speculation arises amid Citigroup’s ongoing efforts to boost its overall performance. The bank has previously exited several international markets, including Australia, India, and Indonesia, and last year announced the sale of its consumer wealth portfolio in China to HSBC. Although the financial details were not disclosed, the portfolio included $3.6 billion in deposits and assets under management.

As part of Fraser’s strategic vision, Citigroup has brought in new blood in an effort to revitalize its wealth management division. Last year it hired Andy Sieg, formerly the head of Bank of America’s Merrill Lynch wealth management business, to lead its global wealth unit. Sieg previously worked at Citigroup from 2005 to 2009.

But in what could be a signal of ongoing difficulties, David Bailin, the CIO for Citi’s wealth division, stepped down from his position last month. That move, which he announced on LinkedIn in April, comes after his lengthy 15-year tenure at the bank.

Citigroup's shares have risen 30 percent over the past year, outperforming the S&P 500. Still, the stock remains down 90 percent from its peak in 2006.