Citi's wealth division reported a record level of net new investment assets in the third quarter, marking a sharp turnaround from the previous quarter, which saw an 81% year-over-year decline in net new investment assets.
Citi reported $18.6 billion in NNIA for the third quarter, up 35% over the same period last year — representing a 9% increase in organic growth over the last 12 months.
Total revenue for the firm was up 9% year over year, to $22.1 billion, surpassing forecasts by $1 billion. Citi's wealth division reported $2.2 billion in revenue for the quarter, up 8% year over year. Revenue from commission and other fees totaled $406 million, up 19% year over year.
Operating expenses for the wealth division were up 4% year over year, to $1.7 billion, due to spending on technology and higher costs from increased transactions and product services. Net income surged 32% over the same period last year, to $374 million.
Fraser points to a mix of factors driving growth
On Tuesday's earnings call, Citi CEO Jane Fraser attributed the wealth division's success to a multiyear strategy aimed at "becoming the lead investment advisor for our clients."
"We've been strengthening the CIO research product. We've been retooling key areas of the investment product platform. You've seen us aligning behind open architecture as a key operating principle," Fraser said. "We've been deepening our partnerships with top-notch, third-party asset management firms. And all of this is helping us drive up the investment fee revenues and executing across this famous $5 trillion of opportunity we have with our existing clients."
Last month, Citi struck a deal with BlackRock that will see the asset manager take responsibility for $80 billion of assets from Citi's wealth management clients — a move that will strengthen the firm's open architecture strategy, Fraser said.
The introduction of new AI-powered advisor tools is also helping drive growth in the division, Fraser said. In August, the firm launched its "AskWealth" chatbot and a pilot program for its "Advisor Insights" tool.
"We've got AskWealth, which is a Gen AI-powered inquiry engine that's handling thousands of clients and service questions with rapid updates," Fraser said. "We have Advisor Insights, which was launched with very strong early adoption that delivers personalized data-driven engagement opportunities for advisors. We had a 75% usage rate on that. So a lot of advisor demand."
During the third quarter, the firm also saw a growing number of retail bank clients funneling into its wealth business pipeline, which saw $4 billion in deposits transferred in the quarter.
"Wealth is capitalizing on those transfers, and we continue to see improved investment penetration and significantly higher investment-related revenue from those customers," Fraser said.
Two wealth units surge as one falls behind
Growth in Citi's wealth division was driven by gains in the firm's Citigold and private bank units, partially offset by a decline in revenue from its Wealth at Work unit.
Citigold, which serves clients with at least $200,000 in assets, reported $1.3 billion in revenue for the quarter, up 14% year over year. The firm's private bank unit, which mostly serves high net worth clients, reported $656 million in revenue, up 7% year over year.
Meanwhile, Citi's Wealth at Work unit, which serves law firms and other professionals, reported $214 million in revenue for the quarter, a 12% decline over the same period last year.
A successful quarter for a scrutinized wealth executive
Citi's wealth head, Andy Sieg, faced scrutiny in the third quarter after reports emerged in late August that the company had hired a major outside law firm to conduct an HR investigation into him.
Sieg went on air to deny the accusations of workplace mistreatment, which alleged bad behavior, including expletive-filled rants, sarcastic remarks made about an executive to a group of colleagues after the person had left the room and a description of one employee's work as "pathetic" in the presence of that person and colleagues.
On Tuesday's call, Citi executives did not address the investigation. But Fraser told Bloomberg TV last month that she is "comfortable" with the findings of the probe.
"I gave Andy a very clear mandate when he joined Citi, which was to transform our wealth business," Fraser told Bloomberg TV. "I'm very pleased with what the team and the business have achieved."
