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3 Words That Capture Citigroup's Comeback Plan


Citigroup (NYSE: C  ) is an enormous company. Its balance sheet homes nearly $2 trillion of assets. Yet the future of the company can be summed up in three simple words.

Citigroup CEO Michael Corbat has laid out three key words that he believes are central to Citigroup returning to the top of the crowded banking landscape. He noted, "[t]he state of our firm in many ways is very strong. Our strategy is well aligned with three dominant, long-term secular trends: one, globalization; two, urbanization; and three, digitization."

The first area Corbat identified was globalization -- which is a buzzword often thrown around in headlines and academic papers -- but with Citigroup, this means concentrating its efforts in growing and developing nations versus the mature, developed economies.

Of the four major banks in the United States, Citigroup has by far the most diverse asset base when considered on a global scale:


Source: Company Investor Relations.

While other banks highlight their global presence, it is often related to their corporate or investment banking operations, and not those focused on international consumers. Consider that Bank of America (NYSE: BAC  ) has five main business lines, its Consumer & Business Banking, Consumer Real Estate Services, then (emphasis added) Global Banking, Global Banking, and Global Wealth & Investment management. It is clear Bank of America wants to be a global bank, however not in the same way that Citigroup does. Bank of America's desire to be global is more focused on companies, not consumers.

While Citigroup is a diverse and global bank, it has had some significant difficulties in 2013, specifically in its consumer banking operations. Its consumer bank has seen its overall net income fall by 12% when comparing the first nine months of this year to 2012.

Michael Corbat attributed this to weakening mortgage revenue in the U.S. and regulation in Korea, but of course, one of the perils of being a truly global enterprise is there are very few times in which every economy of every country is operating at full steam. However, a wide reach is a prime example of economic diversification.

Beyond the broad picture of globalization, next Corbat honed in on urbanization, which is the company's desire to focus not simply on continents or countries but instead, 150 key cities across the globe. This is advantageous because the largest 150 cities represent 50% of the world's gross domestic product -- despite being home to only12% of the global population.

This is important for Citigroup because in its efforts to become truly global, it will be able to tackle those efforts in a targeted manner, which should in turn bring down the costs required to do so. In addition, this will allow Citigroup to reach customers that are often the best for Citigroup because they generally need a bank that can provide more encompassing services, which will bring in more revenue.

Finally, Corbat highlighted there was the trend toward digitization that Citigroup needed to capitalize on. However he importantly noted, "[d]igitization is not just about websites and apps and other customer-facing elements... [but] the way clients, from individuals to big institutions, utilize our offerings."

The transition seems to be under way. In January of 2012,only 22% of Citi's customers had used its mobile banking platform in the previous 30 days. In September 2013, that number stood at 66%, a threefold increase.

It is not difficult to see that our world is becoming more global, more urban, and more digital. While Citigroup has a lot of room for improvement in these three areas, if the bank can capitalize on these huge trends, it could lead to tremendous growth for both itself and its shareholders down the road.

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