Citigroup is embarking on a significant restructuring initiative to streamline its operations, granting CEO Jane Fraser more direct authority in an effort to simplify the organization and boost its stock performance.
Under this reorganization, the leaders of the bank’s five divisions will now report directly to the CEO, and the bank will also trim regional leadership roles outside of North America. While job cuts are anticipated, the exact numbers and financial implications remain uncertain.
In a meeting with investors in New York, Fraser acknowledged the challenging nature of the decisions being made, stating, “We have taken hard, consequential, tough decisions here. They are not going to be universally popular within our bank. It’s going to make some of our people very uncomfortable. I am absolutely fine with that … It is absolutely the right thing to do for our shareholders.” Following this announcement, Citigroup’s shares saw a 1.7% increase, and Chief Financial Officer Mark Mason indicated that the company’s expense guidance for the year would remain unchanged.
This comprehensive restructuring marks another step in Fraser’s strategy to enhance profitability and streamline the bank since assuming leadership in 2021. Despite divestitures and efforts to address regulatory issues, Citigroup’s stock price has lagged behind its peers.
Citigroup is still addressing a 2020 consent order from regulators, which requires the correction of several “longstanding deficiencies” in its internal controls.
New heads have been appointed for various divisions, including Shahmir Khaliq for the services unit, Andrew Morton for markets, Peter Babej on an interim basis for investment and corporate banking, Gonzalo Luchetti for U.S. consumer banking, and Andy Sieg for wealth (joining later this month). The bank aims to hire externally for the banking head position. Non-U.S. businesses will be consolidated under the leadership of Ernesto Cantú, the new head of international. Layers of management have been eliminated in the Institutional Clients Group and Personal Banking and Wealth Management divisions, reducing bureaucracy by eliminating 35 committees.
Fraser acknowledged that the reshuffle is likely to result in departures and plans to hold a town hall meeting to address employee concerns. The new division heads will be responsible for decisions regarding the second and third layers of management, with announcements expected in November and January.
In summary, this restructuring initiative is geared towards enhancing accountability within the organization, albeit it may prompt some departures. Despite a rise in share prices following the announcement, Citigroup’s stock valuation remains relatively low compared to competitors like Wells Fargo, Bank of America, and JPMorgan Chase. Investors are looking for concrete results that meet the bank’s goals, and the changes, while significant, may be viewed as fairly nuanced by industry analysts.