Citigroup Inc. (C) is rearranging its U.S. retail banking and credit card business, according to a Wall Street Journal Report. The information was gathered from the internal memos at Citi. The restructuring also includes management changes at the units. Such a revamp strategy is aimed at improving sales and services in the units.
Last year in September, Cecilia Stewart and Judson Linville were appointed by Citi as heads of retail and cards division, respectively, to devise and execute a new strategy. Cecilia Stewart previously served at Morgan Stanley (MS) while Judson Linville moved from American Express Co. (AXP).
The executives have designed new units and introduced management changes. Citi’s retail business will comprise five units: the branch network, product development, two customer segments, as well as risk and controls.
Steve Troutner has been hired to head the banking products’ team while Brad Dinsmore, the chief of Citi’s North American branch network, will take over another role. Citi is also searching for a head of risk and controls. The former lead finance officer at the company’s private bank, Venu Krishnamurthy will head the high-net-worth and affluent segments.
The cards business will comprise segments including affluent and co-branded cards; mass market; and loyalty and new products. Ralph Andretta has been hired to head loyalty and new products while the company is looking for the head of mass-market business. The company also made other managerial appointments from within.
While restructuring initiatives at Citi are encouraging, the shrinking of its business through assets sale, the CARD Act and the financial reform law continue to challenge revenues.
We believe that solid earnings at Citigroup will remain elusive until its revenues experience a decent growth. Soft revenue momentum and the expectation for slightly higher expenses in 2011 are the downside. A return of capital to shareholders is not expected until 2012.
Nevertheless, the company’s core business, Citicorp, remains attractive with its wide global footprint. The winding down of Citi Holdings is also progressing well and its assets stood at less than 20% of its balance sheet at the end of 2010. Additionally, the anticipated improvement in Citi’s credit quality in 2011 is quite encouraging.
Currently, Citi shares have a Zacks #4 Rank, which translates into a short-term Sell recommendation. Considering the fundamentals, we have a Neutral recommendation on the stock for the long term.
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