On Tuesday, at an investor conference in Boston, Mike Corbat,
the new chief executive officer (CEO) of
), came up with financial targets for the company, set to be
achieved by 2015. Moreover, the CEO announced restructuring
initiatives for the markets where Citi is operating its business.
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Corbat aspires to earn return of 10% on tangible common equity in
2015, up from 7.9% earned in 2012. Moreover, return on assets is
expected in the range of 0.9% - 1.1%, up from 0.62% in 2012,
adjusted for certain items. Specifically, at Citicorp, efficiency
ratio is aimed to be improved to mid-50%.
The CEO is hopeful of achieving the financial goals driven by
revenue growth at a low single-digit rate. Further, efficiency
improvements and continuous shedding of troubled assets at Citi
Holdings' unit is required to reach the target.
Citi operates in a number of markets worldwide. Therefore, Corbat
has planned to restructure, reduce or exit some of the operations
in 21 markets globally to enhance returns. These markets include
Citi's business operations through which the company records less
than 10% of total revenues and earns less than 0.4% of assets.
Though names of such markets were undisclosed, but it was
intimated that most of them involve consumer businesses. Notably,
in Dec 2012, Citi announced its plan to exit consumer businesses
in Uruguay, Paraguay, Turkey, Romania and Pakistan.
Further, in another 18 markets where Citi operates including
United States and the United Kingdom, Corbat aims to optimize the
operations to induce growth in revenues. Currently, from such
markets, Citi earns only 0.7% on assets and records 55% of total
revenues, excluding Citi Holdings.
An additional 20 markets have been identified by the company
where Corbat plans to invest more for growth. These markets
include emerging economies such as in Mexico, Singapore, India,
Hong Kong and China and earn 1.9% on assets currently.
Finally, a group of 48 markets are categorized where Citi
provides transaction processing operations to corporate clients.
In these markets, Corbat perceives more opportunistic business
but plans to "stay the course." Moreover, these markets are the
most profitable for Citi, recording a gain of 2.5% on assets.
Therefore, with the ambition of achieving financial targets in
2015 by restructuring the business, Corbat aims to provide
clients with products globally. Streamlining of operations and
efficiency improvements would aid Citi to accomplish its goals
within the stipulated time.
Currently, Citi holds a Zacks Rank #3 (Hold). Among peers,
) holds a Zacks Rank #1 (Strong Buy), while
Fifth Third Bancorp
State Street Corporation
) retain a Zacks Rank #2 (Buy).