CITIGROUP Inc and Barclays Plc, two banks that have been battling to boost their stock prices for years, are trying to convince investors they’ve missed the hidden value in unsung businesses: the deeply unsexy activities of managing cash, payment flows and currencies for company finance teams.

It’s a good time to highlight these: As large-scale deposit businesses they have seen big revenue gains from higher interest rates over the past couple of years at a time when their more closely watched investment banks have suffered in an industrywide slowdown.

There is also a technology facet to payments and the still-evolving world of digital commerce that the banks hope will catch investors’ eyes.

Still, with interest rates having peaked in the United States and starting to fall elsewhere, the concern is that the gains seen recently in Citigroup’s services division and Barclays’ UK corporate arm are going to be hard to repeat.

Even with consistent returns and a tech angle, these core money-moving businesses don’t really get investor pulses racing.

Barclays and Citigroup both need deal making and trading to recover and their wealth management businesses to gain more traction to really help their overall results.

Citigroup chief executive officer Jane Fraser reorganised the US lender into five main units late last year, cutting layers of management and regional leaders.

Citigroup executives spent Tuesday morning with investors and analysts talking up the performance and prospects of the services division, which encompasses payments, liquidity, trade finance and securities custody among other things.

The transaction-banking parts of this have long been one of Citigroup’s best-performing and most important operations.

It’s the core of the bank’s global network and what makes it most valuable for big corporate customers next to major international rivals like HSBC Holdings Plc, BNP Paribas SA and JPMorgan Chase & Co.

Much of the unit’s recent growth is down to higher rates: Its net interest income was up 28% in 2023, while total divisional revenue grew 16%.

Mark Mason, chief financial officer, said top-line growth would slow dramatically over the next few years as the rate benefit waned, but fees should grow into a larger proportion of revenue and keep the overall business expanding at a low- to mid-single-digit percentage rate.

This is hardly the stuff of investors’ dreams, but the unit uses relatively little capital and so produces decent profits.

Services made a 20% return on allocated capital in 2023, by far the strongest of Citigroup’s five units and versus a less than 5% return for the group as a whole.

Where Citigroup is really trying to get investors excited is with the promise of innovation, claiming its technology sets it apart from competitors.

The difficulty all banks are starting to have with this story, however, is that heavy investment in systems and digital tools is increasingly necessary just to stay competitive.

Newer, nimbler fintechs continue to make inroads into bank services and many enterprise software companies keep adding finance capabilities too.

Banks are competing with these business as well as trying to win them as customers and invest in some of them too -with very mixed results.

Consensus forecasts for annual return on equity. The story is similar at Barclays, whose CEO, C S Venkatakrishnan, concluded his own strategic review early this year and reorganised into five units, too, although not along the same lines as Citigroup.

The bank repitched its UK corporate bank to shareholders Tuesday in the hope of lifting their sentiments.

Again, rates have played a big role: Income from holding companies’ deposits provided most of the revenue and most of the growth in absolute terms.

Fee income is smaller, but it did grow at a faster rate than interest income, a good sign.

Barclays’ income from corporate lending has shrunk however, partly driven by its deliberate move to dial down British risk in the years of economic uncertainty following Brexit.

It is now looking to take on more exposure again as demand recovers. Anna Cross, the bank’s chief financial officer, said that higher loan balances would protect interest income as the deposit business becomes less profitable.

Just like Citigroup, however, Barclays needs its big investment bank and trading arm to improve their profits to bring investors some cheer.

Both banks are also trying to build bigger wealth businesses, but that’s a longer road.

Of the two CEOs it is Fraser who faces the greater pressure: Analyst forecasts for Citigroup’s earnings per share for this year and next have barely budged since its reorganisation, according to Bloomberg data, and its return on equity is expected to be lower in 2026 than Barclays’s is today.

Both banks are forecast to make less than a 10% return in 2026. Citigroup does have a higher stock price as a multiple of forecast book value than Barclays, but that only means a further lift for investors could be harder to inspire.

 - Bloomberg