Chapter 6. Conclusions and Recommendations
Conducted performance analysis tells us that Citigroup will have difficult time to achieve its targets. Desired return on equity in the range of 18-20% is far away from the current 5-6%. The same holds for mid-to-high single-digit organic revenue growth; there was practically no evidence of such in 2005 except for Private Bank and Alternative Investment businesses, which, in any case, provide less than 10% of the next income.
On the other hand, low efficiency gives a lot of opportunities to improve internal processes and to meet the target of organic income growth to exceed organic revenue growth. This can be relatively easy achieved with the right actions. Current cost saving plan through cost cuts still has to prove itself.
Very often holding numerous businesses, which have little to do to with each other within one organisation, introduce extra slack. Hence, Citigroup should seriously start thinking about how to handle its enormous structure and consider spinning off some of the businesses, starting with less profitable and less attractive in the long run. The company management should scrutinise and question existing and potential synergies, whether hidden or made-up, between various parts of its financial empire.
Among its strong assets, Citi brand and international presence will play crucial role in the future of the company. The current US market leaves little opportunities for organic growth at home; therefore, Citigroup should seek it in the offshore markets.
The growth should come from different prospects. While in home markets, the company should focus more on quality and product innovation, in the emerging ones it should put more effort on aggressive marketing to increase its market share.
Chapter 6.1. SWOT
Ultimately, to briefly summarise Citigroup’s competitive position, we will use SWOT framework. The following sections will talk about company’s strengths, weaknesses, opportunities, and threads.
Chapter 6.1.1. Strengths (positive internal)
• Worldwide branch presence, gives access to major markets
• Full spectre of financial products, provides a choice and access to customers
• Strong balance sheet, AA credit ranking
• Economies of scale, ability to access cheap funding and mitigate the risks
• Great track record, strong brand name
Chapter 6.1.2. Weaknesses (negative internal)
• Bureaucratic organisation becoming more and more inflexible, a lot of room for slack
• Huge organisation, nearly 300 thousands of employees, each of them potentially can put the company into legal or financial troubles
Chapter 6.1.3. Opportunities (positive external)
• International growth, opens doors to more profitable markets as compared to the home one
Chapter 6.1.4. Threads (negative external)
• Increasing competition, in the US as well as internationally