Citigroup Highlights Restructured Services Division

Citigroup Inc. (NYSE:C) is highlighting one of its less flashy operations in its latest restructuring initiative, aiming to showcase how its extensive global money-transfer system can enhance profitability.

The services division — one of the bank’s five newly established sectors — will be emphasized on Tuesday at the bank’s Manhattan headquarters. Investors will receive a briefing from Chief Executive Officer Jane Fraser and Chief Financial Officer Mark Mason on the restructuring. This segment has been generating an increasing portion of the bank’s profits, nearly half of the total in the last quarter.

“This business is a diamond in the rough,” stated Mike Mayo, an analyst at Wells Fargo & Co. (NYSE:WFC). “It’s a top-tier operation within a company that’s historically underperformed but is showing signs of improvement.”

This division is vital to the financial system, assisting large international clients with global cash management. It processes payments for goods, services, and salaries, manages capital flows and investments by funds, and ensures liquidity at crucial points in supply chains.

Among its major corporate clients are Inc. (NASDAQ:AMZN) and Uber Technologies Inc. (NYSE:UBER). The U.S. government also relies on Citigroup for domestic and international payroll services.

“We are the backbone for companies worldwide,” said Shahmir Khaliq, head of services, in an interview. “We process nearly $5 trillion daily.”

Despite the typical focus on Citigroup’s trading and credit-card operations during earnings calls, the services business has emerged as a consistent profit generator. It stands out at a lender that has lagged behind competitors and faces regulatory demands to improve its systems. Recently, the stock declined following a report that the Federal Deposit Insurance Corp. (FDIC) raised concerns about the bank’s living-will planning.

The services division has benefited from rising interest rates, which have increased the volume of money it handles, boosting Citigroup’s stock price by about 17% this year.

In April, Fraser described the services division as the firm’s “crown jewel.”

Its main competitors include JPMorgan Chase & Co. (NYSE:JPM) and HSBC Holdings Plc (NYSE:HSBC).

Unique Network Advantage

Citigroup’s extensive network, integrated with its leading foreign-exchange teams, is the result of decades of building a global banking franchise.

“You can’t build this network from scratch today — it’s too complex,” said Okan Pekin, head of securities services, in an interview. “The network alone doesn’t provide a competitive edge; you need the technology, people, and relationships.”

The services division is also focused on using artificial intelligence responsibly, with initial applications expected to launch in the third and fourth quarters, according to Khaliq.

However, Citigroup’s global reach can also be a liability. In January, the bank added $1.3 billion to reserves to cover cross-border and currency risks in Argentina and Russia. The company is also winding down its retail banking operations in 14 countries.

“Investors often wonder if they have to worry about foreign currencies when they think they’re buying a straightforward turnaround story,” said R. Scott Siefers, an analyst at Piper Sandler Companies (NYSE:PIPR). “This adds complexity to the narrative.”

Initially, Citigroup’s stock lagged behind the KBW Bank Index of major U.S. lenders after Fraser took the helm in March 2021 with a mandate to improve internal systems. However, the share price has improved since she introduced more aggressive measures to enhance returns last year.

This week’s presentation aims to sustain that momentum by convincing investors that there is still significant potential for the stock.

“Citigroup has much to prove,” said Mayo. “There are various possible outcomes for Jane Fraser; she could either be dismissed in 2026 or be named banker of the year.”