With new asset drop, Citi CEO refuses to be ‘distracted’ from wealth goals

Citi’s intake of net new assets into its wealth division slowed in the first quarter even as its revenue and net income both surged.

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Citi reported Tuesday that it saw its haul of net new assets fall by 11% year over year to $15 billion in the first three months of the year. Citi has called net new assets — a measurement of asset gains from new or existing clients but not market returns — its “north star” and a key gauge of its wealth unit’s success.

The first quarter’s decline came after another difficult quarter for net asset inflows. Citi reported in January that its net new assets in the fourth quarter were down 54% year over year to $7.2 billion.

But even with those decreases, Citi saw its total balance for client assets climb by 9% over the past year to reach $1.19 trillion by March 31.

“Wealth saw its eighth straight quarter of growth and its returns continue to improve,” CEO Jane Fraser said in an earnings call Tuesday.

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Raising revenue and net income, holding the line on expenses

The wealth unit’s total revenue minus interest expenses rose by 11% year over year to just over $3 billion in the first quarter. Offsetting the revenue gains, Citi’s wealth unit’s operating expenses rose by 1% year over year to just over $2.4 billion, while its provisions for credit losses were down 20% to $101 million.

Credit-loss provisions are money set aside to cover loans that aren’t being repaid or at risk of not being repaid. Citi said in a note that the first-quarter figure was “primarily driven by overdraft losses and international credit cards.”

With those expenses subtracted from revenues, Citi’s wealth unit saw its net income rise by 126% year over year in the first quarter to $432 million.

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For Citi as a whole, highest quarterly revenue in a decade

Those results came amid a marquee quarter for Citi as a whole. For all its business units, Citi reported its highest quarterly revenue in a decade, yet another sign of success in Fraser’s long-running revamp of the firm.

The firm’s total revenues were up 14% year over year to $24.6 billion. Its net income surged 42% to $5.8 billion for the quarter ending March 31. Fraser, now in her fifth year as CEO, has been leading the once-troubled bank through a multiyear overhaul to improve its risk and compliance programs, focus on its chief strengths and provide higher shareholder returns.

Citi’s wealth unit’s results were driven primarily by Citigold and its retail bank, which was recently moved over to the wealth division. Citigold, which works with clients with $200,000 or more in assets, and the bank saw their revenue rise by 13% year over year to just over $2 billion. Citi’s Wealth at Work unit, which serves law firms and other professional clients, meanwhile saw its revenue decline by 8% year over year to $246 million in the fourth quarter.

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Overhaul of Citi’s private bank and new net revenue goals

Another bright spot was Citi’s private bank, which works with high net worth investors. Its revenue rose by 14% to $757 million following a far-reaching internal overhaul.

Last year saw the departure of longtime private bank chief Ida Liu, who later became the CEO of HSBC’s private bank. Citi has put in place a new structure that has four regional heads now overseeing the private bank and reporting directly to wealth head Andy Sieg, who joined Citi from Bank of America’s Merrill in 2023.

Last week, Financial Times reported Citi had set aggressive goals for its private bankers related to net revenues and getting wealthy clients to entrust them with more of their assets. One banker was quoted anonymously in the article as saying the targets were “not possible” to reach.

Fraser refuses to get “distracted” from organic growth goals

Bloomberg reported during the first quarter that Citi was considering buying a regional bank in the U.S. to bring in more deposits. Fraser dismissed any such notion on Tuesday, saying Citi’s growth would come from “organic” means, not mergers and acquisitions.

“Citi has a lot of momentum, and we’re not going to be distracted from it,” she said.

Fraser noted that Citi’s current retail bank has 650 branches, $284 billion in deposits and clients concentrated in six wealthy urban markets.

“So it’s highly aligned with the wealth business,” Fraser said. “It’s an important source of clients for our investment franchise. We saw a lot of top-line momentum from the franchise last year. It was up 21% on retail bank. And we look forward to continue improving its profitability and its performance and realizing the synergies between it and wealth organically.”