Inside Citigroup’s Most Mysterious Business

Touting these businesses might seem like a no-brainer, but they have long stood in the shadows of pretty much everything else in Citi’s vast portfolio, from credit cards to bond trading. 

And what they do isn’t easy to explain. At cocktail parties and investor meetings, executives tended to go with “we oversee the financial pipes,” a tagline Citi is now eager to retire.   

“Ah, the eternal question,” said Okan Pekin, the head of one of the units, securities-services. “What do we do?”

For Citi and Fraser, the problem amounts to more than just giving their stalwart plumbers their due. Investors have never figured out how to value the operations she has now put together into Citi Services. The more Services is valued, the easier it will be for Fraser to make the case that the bank’s stock should be higher. 

Citi is trying to fix that this week. 

Citi Services on Tuesday hosted investors for a full day of presentations. The day, conceived by Citi investor-relations head Jenn Landis, reintroduced to Wall Street a collection of functions most big companies couldn’t do without.

The day at the bank’s New York offices began with Fraser. “When we call Citi the most global bank, this is the reason why,” she said.

The last time Citi held an investor day, in 2022, Services got 20 minutes. 

“The strength of Services hasn’t always received the strength of mindshare that it has long deserved,” said Citi Services head Shahmir Khaliq ahead of Tuesday’s presentations. “We are excited to finally take center stage and pull back the curtain on our business.”

The investors and analysts in attendance saw a different, more confident side of Citi, whose executives in recent decades have had to spend part of their face time with Wall Street explaining how they would fix things.

Any doubts that Tuesday wouldn’t have a new vibe disappeared once Khaliq took the stage with a walk-up song a bit more familiar at Citi Field, where the New York Mets play baseball, than at Citi’s corporate headquarters: Queen’s “We Will Rock You.”

Throughout the day, Citi played video testimonials from big clients such as Walmart and Microsoft. The bank’s own executives often turned to superlatives to describe their businesses: “dominant,” “No. 1” and “only Citi can do this.”

So, what exactly are the units inside Citi Services?

Liquidity management and payments: These businesses help companies open bank accounts around the world; pay their employees and vendors; collect payments from customers; and execute their plans for on where to keep that cash. 

Trade-finance: This arm offers letters of credit that vouch for businesses looking to buy or sell across borders; assists in establishing supply chains in new markets and lends money to smaller, local suppliers so that they can fulfill orders from big companies such as Apple or Procter & Gamble.  

Securities-services: Pekin’s group provides investment managers a place to park their assets and tracks the value of their funds and holdings. The unit also helps companies issue debt and equity securities.

Whom do they serve?

Some 5,000 of the world’s largest multinational companies and investment managers. The business focuses on companies with operations spread across the globe. It also serves the U.S. government and its embassies.  

Underpinning most of those activities is a bank network with links into 190 countries. 

What’s there to get excited about here? 

Services is Citi’s “bright shiny sun” around which its other businesses orbit, said analyst Mike Mayo. He figures it is worth about $90 billion to $120 billion, while all of Citi is only trading at a value of about $114 billion. 

The businesses have been relatively unfazed for two decades, even amid Citi’s tumult, and have continued to deepen their ties to the global economy. Citi executives say they still have room to grow, and will benefit from the rise in digital payments and decisions by companies to move their supply chains around the world. 

Services has a steady stream of revenues from giant companies. Getting more of those clients to trade with Citi and turn to its bankers for advice is a key plank in Fraser’s overhaul.

Once one of Citi’s biggest Wall Street critics, Mayo has recently turned more bullish about Citi thanks in part to Services. A few months ago, he started asking investors what they knew about Citi Services and its results. Not much, it turned out. 

Many couldn’t peg its annual revenue growth at 8%, or returns at more than 20%, far better than all of Citi. And many didn’t know Citi Services actually increased deposits by 20% during the 2008-09 financial crisis even as Citi nearly failed. 

“Even seasoned investors will get those answers wrong,” Mayo said.

Write to Justin Baer at justin.baer@wsj.com

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