Citi to Boost European Retail Ops - Analyst Blog

Citigroup Inc. (C) is planning to restructure its retail presence in Europe, according to a report in Financial Times. As reported, the company is looking forward to rebuilding a network of flagship outlets for strengthening its operations in major Western European cities next year. 

The network is expected to be built across almost 100 cities around the world with 10 to 15 of them in Western Europe. Wealthy customers who travel very often are targeted. The flagship outlets of Citi would somewhat resemble the store model employed by Apple Inc. (AAPL). 

Citi was severely impacted during the financial crisis and the company had to resort to government bailout. The company opted for restructuring and split its assets into Citicorp – its core assets portfolio, and Citi Holdings – non-core asset portfolio. 

Citi now remains focused on developing its core business activities including retail banking operations. The focus now seems to shift from smaller cities to bigger ones. Other regions such as Eastern Europe, the Middle East and Africa are also on its target list and the company would extend its operations in those part. 

In the past two years, Citi has significantly proceeded with its restructuring initiatives and targets to make the organization a leaner one. However, we believe that the shrinking of its business as a result of assets sale, the CARD Act, Basel III requirements, the Dodd-Frank Act, and other legal/regulatory matters are expected to suppress returns and earnings growth.

Nevertheless, the company's core business, Citicorp remains attractive. Its global footprint would boost its earnings and make up for the losses in other areas. 

Citi currently has a Zacks #3 Rank, which translates to a short-term Hold rating and indicates no clear directional pressure on the shares over the near-term. Considering its fundamentals, we also have a Neutral recommendation on the stock.

 
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