Citi doubles asset inflows, edging closer to profit goals

Citi more than doubled its inflows of net new assets in the third quarter, climbing closer to its profit goal for its wealth management unit.

Processing Content

Citi reported Tuesday that its haul for net new assets rose by 105% year over year to $38 billion in the third quarter. Citi Wealth Head Andy Sieg has called this measure of asset inflows "our North Star" because it takes into account flows only from new or existing clients and not market appreciation of already invested assets.

During an earnings call Tuesday, Chief Financial Officer Gonzalo Luchetti said the new assets have helped Citi's wealth division approach a key profit goal: improving its return on tangible common equity. This profitability measure, often referred to as ROTCE, measures the unit's net income as a percentage of common stock held by shareholders.

Citi reported the ROTCE for its wealth unit rose to 14.3% in the third quarter, up from 7.8% a year ago.

"So that gives us confidence that soon we'll be able to get into the 15% to 20% near-term target window that we spoke about at Investor Day," said Luchetti, referring to an event for shareholders held in May.

Bringing the retail bank into wealth management

CEO Jane Fraser has placed Citi's wealth business at the center of her plans to revive a firm often seen as a laggard among global megabanks. At the event in May, Sieg announced plans to add 400 advisors and personal bankers for the firm's U.S. branches and Citigold unit for wealthy clients.

In a bid to capture more of the assets its wealth management clients hold at other institutions, Citi moved its U.S. retail banking business into the wealth division last year. Citi has estimated that its banking clients have roughly $3 trillion parked elsewhere.

Starting on Oct. 26, Citi will pay higher savings-deposit yields to clients who are in its Citi Priority, Citigold and Citigold Private Client Relationship service models and have both a regular checking and savings account. To qualify for the higher returns offered by Citi's "Premium Boost" rate, clients will have to complete at least one "required activity" a month. For instance, investors at the Citi Priority tier, who have to maintain a balance between $30,000 and $200,000, must deposit at least $5,000 into their checking accounts each month.

Assets, revenue, net income and AI

Meanwhile, Citi's wealth division presented further evidence indicating a strong third quarter. The unit's client balances — inclusive of invested assets, deposits and loans — rose by 9% year over year to $1.39 trillion. Its total revenue was up by 15% to $3.3 billion, and its net income by 93% to $585 million. Operating expenses were up only 3% to $2.4 billion.

Of the individual units within Citi's wealth business, the biggest contributors of revenue were its Citigold and retail banking divisions. Citigold (for clients with $200,000 in assets and deposits) and the retail bank saw their revenue climb by 16% year over year to nearly $2.3 billion. The firm's private bank saw its revenue rise by 17% to $766 million, and its Wealth at Work unit, which provides wealth management to lawyers and other professionals, saw its revenue go up by 7% to $228 million.

Like many firms, Citi is looking to AI to deliver wealth management services more efficiently and to more clients. At the investor day in May, Sieg introduced an AI assistant known as Citi Sky capable of providing investment-related prompts and answers.

Fraser said Tuesday that it's still too early to say how AI is helping the firm generate revenue.

"So AI is happening all across our firm, and it's … helping us earn and it's helping us save money," she said.