Citigroup Inc. is reorganizing its U.S. wealth management business with an eye toward cutting expenses and boosting market share.
In a memo to employees Monday, Citi announced that it is splitting the wealth management unit, which includes Smith Barney’s retail brokerage operations and the company’s private bank, into a three divisions for very wealthy, wealthy, and “emerging affluent” customers.
Sallie Krawcheck, the unit’s chief executive officer, said in an interview Monday that Citi increased its market share in asset management organically last year, and that it hopes it can increase its share again by segmenting customers, despite difficult market conditions.
Last year revenue from Citi’s global wealth management business increased 27%, to $3.462 billion, and net income increased 27%, to $523 million.
“We are playing offense and trying to drive revenue while at the same time keeping a close eye on expenses,” she said. “We want to take a hard look at any expense that doesn’t benefit our clients directly.”
Lowering expenses may mean layoffs in the wealth management unit, Ms. Krawcheck said, but nothing is definitive yet. “This move isn’t driven to be an expense-saving exercise, but we want to find out the best way to run this business efficiently.”
Analysts said the changes are the latest indication that Citi’s new chief executive, Vikram Pandit, plans to tinker with the business model, rather than changing it radically by divesting certain business units, such as wealth management.
Ms. Krawcheck agreed with that assessment.
“This is the natural progression for wealth management and part of what Vikram wanted to accomplish at Citi,” she said. “He is an impatient person, and I mean that in the most positive fashion possible.”
Observers said that many of Citi’s competitors, including Merrill Lynch & Co. Inc., Bank of America Corp., and JPMorgan Chase & Co., are using a similar strategy to foster wealth management growth.
Ms. Krawcheck acknowledged that Citi’s changes are not revolutionary.
“This organization hasn’t always been first. We are sort of a fast second,” she said. “What a lot of competitors have done in terms of segmentation, we have lagged behind a bit, but we have started with a strong private bank and a very strong Smith Barney, so I think it’ll be easier to do now, since we have strength in both.”
