Citigroup shapes up for a race its rivals are already winning

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favorite tales on this weekly e-newsletter.Jane Fraser has achieved so much since she took over as Citigroup chief govt in March 2021. She has pared dismantled geographical silos, simplified enterprise traces, lower jobs and made some big-name hires. On Wednesday, Citi stated it could promote 25 per cent of its Mexican retail banking enterprise, following divestment plans first proposed three years in the past. This may all be nice information — if solely the remainder of the trade had stood nonetheless.Citi’s inventory has greater than doubled in worth for the reason that begin of 2024 to commerce at a 17-year excessive. However as Fraser has grappled with manifold issues, rival banks have raced forward. JPMorgan Chase’s colossal steadiness sheet has grown 23 per cent since she took over, twice as quick as Citi. Goldman Sachs has ridden the growth in buying and selling and funding banking, whereas Morgan Stanley has soared in wealth administration. Meaning Citi’s enchancment seems to be meagre when its valuation is measured in opposition to its friends. Fraser’s financial institution trades at slightly below its e-book worth, in line with LSEG information. That’s higher than the lowly 0.4 occasions it noticed in October 2023. However others have fared significantly better. Financial institution of America trades at round 1.4 occasions; JPMorgan, at 2.6 occasions, has widened the hole with Citi significantly over the previous 5 years.The sale of 25 per cent of Banamex, Citi’s Mexican client banking enterprise, neatly encapsulates the slog. Again in January 2022 it hoped to promote the unit outright. But it surely deserted these plans in 2023 amid opposition from Mexico’s then-President Andrés Manuel López Obrador and pivoted in direction of an preliminary public providing as a substitute.The brand new plan, promoting a stake to financier Fernando Chico Pardo, seems to be like a third-best choice. The Mexican division’s implied valuation of $9.2bn is much from the $12.5bn Citi paid for Banamex in 2001, and creates a $726mn goodwill impairment. What seems to be like a vote of confidence from Pardo might additionally deter some potential buyers in a future IPO, given the scale of his stake and affect he can wield as a member of the board. Divesting Banamex is only one of Fraser’s challenges on the highway to hitting her goal of a 10-11 per cent return on tangible fairness by 2026. It will give buyers higher publicity to the nice elements, just like the financial institution’s commerce finance and custody divisions. However there stay prices to chop, prospects to win, and rivals to beat. Citi remains to be wanting inward, however its largest friends are already wanting ahead.pan.yuk@ft.com