If you’re wondering what’s driving Citigroup’s turnaround, rent a Citi-branded bike in New York City, and ride it up to one of the company’s new branches in midtown Manhattan that target prosperous customers.

You’ll find a hub of wealth managers who cater to well-heeled clients. On the way, you may pass one of a rapidly expanding number of fee-free, Citi-branded ATMs that the company has established in a half dozen U.S. urban markets.

As Citi looks to boost profitability and catch up with its peers, the company is homing in on a small slice of its customer base: the highly affluent, as well as those who are on the road to getting there.

That was the vision laid out Tuesday by the Citi executives during an investor day presentation at Gotham Hall in New York. During the day-long event — its first since before the crisis — the company outlined a plan to boost return on tangible common equity to above 10%, which is a widely accepted standard in banking.

The plan relies heavily on its consumer banking division to get there. Achieving the 10% target will involve investing heavily in catering to wealthy clients, particularly through its Citigold program, which serves those with over $200,000 in deposits and investments. Such investments are expected to be funded by ongoing efforts to cut branches and trim operating costs.

“We believe there is significant upside from this point by increasing penetration from our existing affluent clients to drive revenue growth,” Stephen Bird, CEO of global consumer banking, said during a presentation to investors.

Bird insisted that Citi's affluent customer base has plenty of growth room. While over 40% of Citi clients in the U.S. meet the $200,000 hurdle to qualify for Citigold, for instance, only 12% consider Citi their primary bank.

It launched the Citigold product in December, offering high-end clients a mobile app that combines retail and investment banking services, including the ability to initiate trades, send payments and contact relationship managers from their mobile phones. Meanwhile, the company has hired wealth managers that it is “hubbing” in branches in large, urban markets, according to Bird.

“This is a lower-cost-to-serve model,” Bird said.

The focus on growing its affluent customer base is a pivotal part of Citi’s larger plan to boost its lagging returns.

To hit its 10% target, Citi is leaning heavily on its global consumer bank, projecting the business will boost revenue by about 5% per year through 2020.

Its profitability has dragged in recent years as the company has worked through problem assets following the crisis and refocused its operations on select markets and less risky lines of business. Citi has exited consumer banking, for instance, in Brazil, Colombia and Argentina in recent years.

Over the past 12 months, Citi’s return on tangible common equity of 7.8% significantly lagged its big-bank peers. JPMorgan Chase, Bank of America and Wells Fargo have posted returns of over 10%.

Citi’s share price, meanwhile, has increased 37% since the November election to about $68.

To hit its 10% target, Citi is leaning heavily on its global consumer bank, projecting the business will boost revenue by about 5% per year through 2020 — slightly higher than its 4% pace over the past year. Growth in the Citigold product, as well as its branded credit card portfolios, will be essential ingredients in that revenue broth.

Citigold clients, for instance, could produce 25 times more revenue growth than a typical mass-market customer, the company said.

Cost cuts in the firm’s consumer bank will also be a major focus. Citi expects to improve the efficiency ratio in its global consumer bank to about 50% from its current level of 55.3% by continuing to slash branches and drive mobile adoption.

Over the past year, Citi has slashed its retail footprint by 17 million square feet, or 25%, according to CEO Michael Corbat. The company operates about 700 branches in six primary markets in the U.S.

“We’re ahead of our peers on the shift away from brick-and-mortar branches to a lighter footprint with higher digital engagement,” Corbat said during his opening remarks Monday.

Throughout the presentation, Citi executives emphasized that the company has crossed an “inflection point” in recent years, having mostly worked through the problem assets after the financial crisis in Citi Holdings, its so-called “bad bank.”

In outlining its plan to achieve its 10% target, the company assumed no changes in regulation. Still, executives said that enactment of legislation to reduce corporate tax rates could accelerate growth in its net income. If tax rates decline, they also warned, the company would likely take an initial writedown on its significant portfolio of deferred tax assets.

“We are clearly the world’s most global bank,” Corbat said. “But our goal is to be recognized as the world’s leading bank, and generating the net income and returns one would expect from the holder of that title.”

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Kristin Broughton

Kristin Broughton

Kristin Broughton is a reporter for American Banker, where she writes about the business of national and regional banking.