As Citi pushes ahead with its effort to grow its wealth business, second-quarter results offered fresh evidence that the strategy outlined at its recent investor day is beginning to gain traction.
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In its July 14 earnings report, Citi said wealth revenues rose 13% year over year, or 16% on a normalized basis that excludes one-time factors. The company has “a clear path” to 15% to 20% growth, CEO Jane Fraser said during the earnings call.
“We’ve got a number of different drivers beneath that, be it the integration of the retail bank with wealth, helping us drive more of the customer conversion from deposits to also having wealth activity, as well as what we’re seeing from capturing wealth creation globally from our global network and the relationships we’ve got,” Fraser added. “So it’s kind of firing on all cylinders as we steadily march to improving the returns and margin of the business.”
Retail referrals emerge as growth engine
The results come about two months after the firm’s May 7 investor day, where executives outlined plans to add hundreds of advisors and personal bankers. At the time, the company said it had roughly 2,300 advisors globally but did not break out its U.S. headcount.
READ MORE: To gain wallet share, Citi to add 400 U.S. advisors and personal bankers
However, Citi now has about 900 wealth advisors and relationship managers in its U.S. Citigold business, a spokesperson told Financial Planning.
Citi is in the process of integrating its U.S. retail bank with its wealth operation. Citigold referral activity climbed 23% in the second quarter, Citi Head of Wealth Andy Sieg wrote in a memo distributed the day of the earnings report. A spokesperson provided a copy of the memo to Financial Planning.
Beyond Citigold, the company is continuing to expand its U.S. retail banking and private banking teams, Sieg wrote.
Those efforts are part of a broader wealth strategy that the company launched almost three years ago, according to the memo. The plan centers on combining client advice with AI-powered technology, an innovative culture and rebranding under the OneCiti banner.
READ MORE: With new asset drop, Citi CEO refuses to be ‘distracted’ from wealth goals
$30B in new assets boosts wealth results
In its wealth division, net new invested assets grew $15.7 billion in the second quarter, contributing to a 9% organic growth rate year over year and bringing net new investment assets for the first half of the year to $30 billion, according to the memo. Investment revenues rose 20% quarter over quarter, driven by double-digit growth across the private bank, Citigold and U.S. retail banking.
The private bank also led the company’s 4% growth in average deposits during the second quarter. The wealth business posted a pretax margin of 23%, said Chief Financial Officer Gonzalo Luchetti.
Expense growth was held to 3%, according to Sieg’s memo. Net income in the wealth business was $583 million — up 51% from a year earlier. Return on tangible common equity came in at 14.4% in the second quarter and 12.6% year to date.
