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On Tuesday, at an investor conference in Boston, Mike Corbat, the new chief executive officer (CEO) of Citigroup Inc. (C - Analyst Report), 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.
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, BankUnited Inc. (BKU - Analyst Report) holds a Zacks Rank #1 (Strong Buy), while Fifth Third Bancorp (FITB - Analyst Report) and State Street Corporation (STT - Analyst Report) retain a Zacks Rank #2 (Buy).