22nd February 2024

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Business Industry and Financial

Citigroup (C) to Establish Investment Banking Unit in China

Citigroup C is likely to launch a wholly-owned investment banking unit in China within the next 12-18 months. The unit will hold job positions for around 30 employees initially, which is expected to increase to almost 100 in the upcoming years. This was first reported by Reuters.

Per a source familiar with the matter, C has already hired three people for senior management roles of chief executive officer, chief financial officer and chief compliance officer for the unit.

Markedly, in the latter half of 2021, the bank had applied for a wholly-owned brokerage business license in China as C intended to enhance its presence in the market. Per a source familiar with the matter, the China Securities Regulatory Commission (“CSRC”) approved the application in December 2023.

Wall Street biggies, including JPMorgan Chase & Co. JPM and The Goldman Sachs Group, Inc. GS, already have well-established investment banking units in the country. In fact, JPM has been attempting to expand its business in China. Last year, it received regulatory approval from CSRC to complete its acquisition of the China fund manager, China International Fund Management Co., Ltd.

Also, JPM was the first foreign bank to fully own a futures company in China. Last year, CSRC accepted Morgan Stanley’s MS application to set up a futures company in the country. With this, MS will become the second foreign bank to wholly own a futures business in the world’s second-largest economy.

China is one of the broadest and deepest growth markets outside the United States. Hence, expansion efforts in the country are a strategic fit for Citigroup and will support its top-line growth amid plans of exiting its global distressed-debt trading business as well as its municipal bond business.

Through such business exits the company intends to revamp its operations as well as its organizational structure.

Particularly, since April 2021, the bank has been emphasizing growth in core businesses by shrinking international operations. It remains on track to exit the consumer banking business in several international markets.

Citigroup’s efforts to simplify governance structure involve eliminating various management layers to improve efficiency. Accordingly, leaders of each of C’s five main businesses will be members of the Executive Management team and report directly to Jane Fraser, the chief executive officer of C. This move is expected to increase accountability and ensure a swifter decision-making process.

In line with the organizational realignment, in November 2023, Citigroup commenced the elimination of various jobs.

Citigroup’s shares have gained 32.5% in the past three months compared with the industry’s 23.9% growth.

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C presently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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