Despite the decision to hire veteran banker Terri Dial, it remains unclear whether Citigroup Inc. intends to deploy more capital to expand the U.S. consumer arm she will run.
The $2.2 trillion-asset company's consumer arm has been a steady contributor to the bottom line, but in recent years it has been a source, rather than a recipient, of capital for growth as the company has focused on funding international operations.
Now with Vikram Pandit, Citi's chief executive, conducting a companywide review of capital allocation to slash expenses and restore profits, analysts say what is in store for the U.S. consumer business is unclear.
Jeffery Harte of Sandler O'Neill & Partners LP said that Ms. Dial, who is expected to join Citi this week from Lloyds TSB Group PLC, likely would have to work with the resources that already have been allocated to the business. She probably would be called upon to shrink consumer assets and use capital "more intelligently" than Citi has in recent years to increase profits.
Mr. Harte does not anticipate a broad effort to move more capital toward Citi's retail banking, consumer finance, and cards operations here. "I would not expect them to de-emphasize the international franchise."
Jason Goldberg of Lehman Brothers agreed with that assessment but said: "I wouldn't say that the U.S. operations are capital starved." Ms. Dial could succeed by shifting focus within the U.S. consumer businesses and better identifying where its strengths lie, Mr. Goldberg said. For example, "they need to target their metro markets better."
However, Frank J. Barkocy, the director of research at Mendon Capital Advisors Corp., said he expects broad changes in the way Citi allocates capital — with a larger share given to the U.S. consumer operations. Ms. Dial's mandate might well include expanding the retail branch network and, at some point, even making retail banking acquisitions, he said.
"There will be more focus and effort on the U.S. market," even at the expense of capital previously spent on investment banking and consumer operations abroad, Mr. Barkocy said. "They do have a significant presence overseas but have fallen behind in the U.S."
Citi has said it might divest its consumer operations in Japan if results there remain choppy. However, in a memo to employees this month, Mr. Pandit reiterated what Citi executives have stated for years: The company sees considerably more growth opportunities abroad than in the United States. "No other financial services firm has assets and businesses positioned as well as these to leverage global and regional growth opportunities," he wrote in the memo.
Mr. Harte said he expects more changes like those Citi has been implementing in the United States for several quarters. It has been closing unprofitable bank branches in Boston, Philadelphia, and elsewhere, and it has sold branches in markets it does not see as strategically important.
This month it said it would sell most of its mortgage production, rather than keeping the loans on the books, and consolidate its mortgage-related operations, such as home equity lending, under a single unit.
On Friday, The Wall Street Journal reported that Ms. Dial, Lloyds' head of retail banking since 2005, would join Citi this week as the head of its global consumer operations, one of Citi's four lines of business.
Before joining Lloyds, Ms. Dial was the president and CEO of Wells Fargo & Co.'s bank subsidiary. At Citi, she would succeed Steven Freiberg, who has been the chairman and CEO of the U.S. consumer business and a co-chairman of the global consumer business since 2005. Mr. Freiberg would become the head or the global credit cards operations, a newly created position. Ajay Banga, Citi's other global consumer co-chairman and the chairman and CEO of the consumer business outside the United States, would become the head of Asian consumer operations.
Also Friday, Citi said in a memo that it has promoted Nick Roe to lead its prime brokerage business, succeeding Ali Hackett and Tom Tesauro, both of whom have left the company.
Mr. Roe joined Citi in 2005 from Deutsche Bank AG and was the head of the New York company's European prime brokerage business. He will continue to report to Steven Bowman, the head of hedge fund services.
