Citigroup won't spin off its cash-cow wealth management business, but will reorganize it into three segments defined by clients' level of wealth.
Meanwhile, Citi's investment banking operations also might be reorganized by merging the corporate bank with the investment bank, according to unnamed company sources cited by The Wall Street Journal. "The investment-banking group, in the process of eliminating about 4,200 jobs, is likely to endure more layoffs," the Journal says.
The wealth management realignment, unveiled by division chief Sallie Krawcheck in an internal memo that Citi released to the Journal, represents the latest piece of Chief Executive Vikram Pandit's plan to improve coordination among the financial services conglomerate's sometimes fractious business units. While dissatisfied investors and pundits have long urged a breakup of the company, Pandit is pursuing a moderate course, modifying the leadership and structure of various units while retaining most of the "financial supermarket" built during the 1990s.
The U.S. wealth management business will now be divided into units serving ultra-high-net-worth, high-net-worth, and "emerging affluent" customers. Clients with more than $25 million to invest fall into the ultra-high-net-worth bucket. The retail or "emerging affluent" group consists of clients with less than $500,000. High-net-worth comprises those in the middle.
Until now the division has been made up of Smith Barney, the retail brokerage; Citi Private Bank, for the wealthiest clients; and Citi Investment Research. Charlie Johnston, current chief executive of Smith Barney, will become president of the wealth management division for the U.S. and Canada.
The U.S. wealth-management business earned about $2 billion in profit last year, more than half the parent company's net income.
Another change that's still being considered is combining Citi's U.S. consumer group - made up of the retail bank, credit cards, and consumer lending - with the wealth management business. That could accelerate the integration of Smith Barney brokers into Citibank branches, the Journal says.