DBRS has confirmed the ratings of Citigroup Inc. following the company’s announcement of its plans to create a more streamlined organization, reduce expense growth and drive future expansion.

The rating agency says that it views Citi’s announcement as positive from a ratings perspective, but not significant enough to trigger any rating action. “Successfully executed, the plan is likely to improve the company’s operating efficiency and help Citi sustain positive operating leverage in the future,” it says. “Even with its strong franchise, Citi has struggled to generate positive operating leverage in recent years with expenses growing twice as fast as revenues in 2006 over 2005, making earnings growth much more difficult to achieve.”

DBRS says that it considers this plan an important component of Citi’s ongoing efforts to strengthen its franchise and deliver improved earnings growth. “These efforts also include initiatives to generate growth in the U.S. consumer business, increase the contribution of international businesses and manage credit quality in a weaker economy. Going beyond just expense saves, the plan seeks to embed better procedures to enhance how the company operates,” it notes. Citi plans to eliminate layers of management, consolidate functions and operations to eliminate duplication of effort across businesses and geographies, increase the use of shared services, expand centralized procurement and continue to rationalize technology spending.

In DBRS’s view, the challenge for Citi is to execute the plan successfully in an environment that is already challenging. “At a time when the yield curve remains inverted, creating margin pressure, DBRS also expects the U.S. credit environment to deteriorate moderately in 2007, creating additional headwinds for banks, including Citi,” it says.

The company also faces stronger competitors in global and local markets that are likely to make revenue growth more difficult to achieve, DBRS adds.