Citigroup Considers Major Overhaul, Could Split Investment Banking Unit

The plan envisages splitting the bank’s Institutional Clients Group (ICG) into its three primary business segments: investment and corporate banking, global markets, and transaction services, the FT reported on Monday. The division generated about three-quarters of Citi’s $14.8 billion net 2022 profits. The newspaper said the newspaper would run the business by its current heads, who would report directly to Fraser.

The move comes as Wall Street’s big banks continue to shed staff amid a muted environment for mergers and acquisitions, and investors remain concerned about rising tensions between the United States and Russia. Earlier this year, Citi began cutting hundreds of jobs worldwide, including in its Asia-focused investment banking team. Its Hong Kong-based investment banking unit was hit particularly hard, with over 40 people in the city told to seek other positions within the company. The cutdowns are also part of a broader trend of big banks eliminating overlapping or non-core businesses to streamline operations and become leaner.

Citi’s ICG business is also suffering from a weakening market for fixed-income products, with revenue falling and profit margins declining over the past year. In addition, ICG is facing competition from digital lenders such as SoFi and Marcus by Goldman Sachs.

Investors have been looking for more cost-efficient ways to manage their money. As a result, Citi has been investing in new technology and overhauling existing systems to make its operations more efficient. In the near term, the firm is expected to see an increase in expenses as it invests in this effort. Over the longer term, costs are expected to normalize after the bank completes its transformation efforts.

Regarding its global markets business, it has shifted focus away from commodities in recent years and is focused more on financing large corporations and governments. It has also been reducing its exposure to emerging markets and moving toward more stable assets.

The company’s transaction services business has been a bright spot. Its global payments platform, which provides access to multiple instant payment networks across 29 countries, saw usage grow by over 78% in the first quarter of this year. In addition, the firm’s treasury and trade solutions business focuses on sustainable supply chain financing, which has been increasingly popular with clients as they seek ways to offset higher raw material costs.

Despite the challenges, Citi has made progress in building its position in the Asia-Pacific region, mainly through its network of local offices and extensive relationships with large corporates and financial institutions. Its treasury and trade solutions franchise is also expanding, with the firm investing in its local teams to deliver the full range of global capabilities to its Asian clients. It is leveraging its deep connections with acquirers and e-wallets in the region to provide its customers with a unique and comprehensive suite of solutions. In addition, the firm is deploying its proprietary transaction services and global payment platforms to support growth opportunities in the region.