Citigroup's wealth management unit brought in a record amount of net new investment assets in the third quarter, capping a three-month stretch in which the New York-based bank beat profit forecasts even as it pushes to clear regulatory orders that have hung over it since 2020.
Amid a busy day for bank earnings including updates from JPMorgan, Goldman and Wells Fargo, Citi revealed it had netted $5.25 billion in profit, or $2.85 a share, which was significantly up from $3.8 billion, or $1.86 a share, a year earlier. Analysts had expected $2.66 a share, according to LSEG data reported by Reuters.
Total revenue increased 8% to $23.8 billion, with gains in services, wealth, markets and banking, the bank disclosed in its Q3 results.
That wasn't enough to impress investors, however, as Citi shares fell 3.2% by midday Tuesday after giving up early gains. The stock is still up 9% this year and has outperformed the broader bank-stock index.
In a memo, Andy Sieg, head of Citi Wealth, hailed the results as wealth revenue rose 15% from a year earlier, marking the business’s 10th straight quarter of revenue growth. The unit’s net income rose 93% to $585 million. Expenses grew only 3%, which resulted in operating leverage of 12%.
"Most notably, net new investment assets (NNIA) were $38 billion this quarter – a record for Citi Wealth," Sieg said in the memo viewed by InvestmentNews.
Breaking the NNIA record down, Citi Private Bank’s Latin America, EMEA and North America teams each posted record net new investment assets, as well as Citigold, the bank’s North American service for affluent clients. According to the memo, most of the growth came from existing clients consolidating more assets with the bank.
The mix of client money is also changing. Investment assets now make up 55% of total client balances, compared with 42% in 2022.
“Three quarters in, and the momentum this year is real,” Sieg wrote.
This month, Citi is launching Citi Premium Boost, which Sieg described as “one of the most important initiatives we have undertaken to strengthen our value proposition and deepen engagement with affluent clients.”
Sieg also alluded to the broader leadership roles for Kris Bitterly and Anne McCosker during the quarter. In September, Bitterly was appointed head of Citi Private Bank Latin America, adding to her current role leading Citi Global Wealth at Work, while McCosker was given a new role as head of Wealth Lending and Deposits.
The two internal promotions come amid a broader run of senior wealth hires at Citi. In August, Citi hired JPMorgan veteran Adam Clark to lead wealth planning, and brought in Alex Kokolis from MSCI as head of investments platform experience.
“Q4 is historically our most active client window – portfolios to reposition, wealth structures to put in place, planning decisions to close out the year,” Sieg wrote. “We should be at the center of those conversations and the lead advisor at the table.”
The wealth unit still has ground to make up. As reported by Reuters, the unit posted the lowest return of Citi’s five core businesses in the first half of the year, at 12.6%, compared to its long-term goal of 20%.
In a research note, Bank of America analyst Ebrahim Poonawala wrote that the wealth division “shows the greatest room for improvement” among the five businesses. He said it needs faster growth in investment assets and a larger share of revenue from fees rather than from interest spreads.
Two people familiar with the matter told Reuters that both wealth and retail banking could benefit from more scale, with strategic alternatives that include opening more branches or buying a wealth manager.
Citi is also working hard to rid itself of regulatory concent orders relating to issues going back to October 2020. That year, Citi mistakenly sent about $900 million to Revlon creditors, prompting the Federal Reserve and the Office of the Comptroller of the Currency to demand fixes to the bank’s risk management and data governance. The OCC fined Citi $400 million.
In 2024, regulators added roughly $136 million in penalties after finding the bank had not moved fast enough on data-quality management. The OCC lifted its 2024 amendment in December last year, but the original order is still in force.
As reported by Reuters, Citi had hoped to get to a clean slate by the end of this year. As recently as the summer, the bank aimed to submit its paperwork to regulators by year-end or in the first quarter, but progress slowed briefly when an internal audit rejected work on data tracing, which is the bank’s ability to trace where aggregated account data comes from. CEO Jane Fraser has said the required work is about 90% complete. Both the Fed and the OCC must approve lifting the orders.
Citi spent $3.3 billion on its transformation program last year. Fraser said Tuesday that the bank is reducing those costs and using artificial intelligence and automation to work more efficiently.
Tim Long, a former deputy comptroller at the OCC, said the bank has reason to move quickly. “It makes sense for the bank to try to get the orders finalized in this [Trump] administration and avoid potential change of regulators and a different approach,” he said.
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