Citigroup Inc. (NYSE:C) has been beefing up its wealth building team, and the strategy seems sound. By targeting individuals with over $250,000 of ‘investable assets,’ Citigroup is looking to expand its capital base under management rapidly. By strengthening its retail network, and targeting wealthier clients, it seems to be a signal that the unit is ready to grow.
In another sign that Citigroup is targeting wealthy individuals in order to grow the company’s wealth, the company announced that is hiring U.S. Trust executive Charles Merrill to work as their New York regional executive. Merrill is the latest in a line of executives to come over from U.S. Trust, which is a unit of Bank of America. Since Bank of America took over Merrill Lynch, a number of top people have left BAC and defected to C.
Merrill Lynch and U.S. Trust target extremely different customers. Merrill Lynch targets the ‘merely affluent’ where as U.S. Trust targets the ‘ultra-rich.’
The strategy seems sound for Citigroup. As they target ‘ultra-high-net-worth’ individuals the amount of money they manage should rise dramatically. At the same time, management costs should remain low, since you aren’t dealing with a broad base of customers. Instead of targeting the mass market, they’re bulking up their higher end business in order to find clients with real money who might not be as needy as lower net worth individuals tend to be.
For a company that needs to improve its cash flow organically, extending offerings to your highest income customers and trying to find new ones with a lot of money seems like time well spent.
Improved operating margins could fry the shorts
Citi needs to keep one step ahead of the shorts and boo birds, who are coming back to the company the way the swans make it back to Capistrano
Citigroup short interest has risen to 482 million shares in the last two weeks, marking a sudden rise in those who wish to profit from a Citigroup stock collapse.
The shorts seemed to have pounced on two key issues that have soured some on C’s chances. First, the European debt crisis got the short’s motors running. Secondly, the Goldman Sach’s scandal turned them on even more. The realm of short sellers loves scandals and crisis, so many sellers jumped on the band wagon and dumped shares. Right now Citigroup is under enormous selling pressure, but the fundamentals indicate the company is doing well from a technical standpoint. The company is in a maturing phase of a multiyear turnaround. Investors who are shorting because of GS and the Europeans might just be in for a rude awakening as the stock market settles back down. Unemployment has been one of the biggest issues facing Citigroup, and that problem is beginning to abate. With unemployment comes high default rates, which is the bane of any enormous financial services company. As the American consumer gets back to work, he’ll start paying his bills again. Not only that, but he’ll buy more products, which will stimulate the overall economy. When that happens, the people who are holding on to shares of Citigroup they bought in the $4 a share range will be happier than pigs in slop. Right now the shorts are having their fun, but it wouldn’t take much for C shares to rally back. Right now C shares have found support at around $4.20 a share. For a big cap of this magnitude, C shares look like a complete bargain at the current price
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