Citigroup plans to streamline its operations and enforce job cuts as part of CEO Jane Fraser’s efforts to simplify the organization and improve its stock performance. In this reorganization, the heads of the bank’s five divisions will report directly to the CEO, and regional leadership roles outside of North America will be eliminated. The specific number of job cuts and their financial impact is yet to be determined.
During an investor meeting in New York, Fraser acknowledged that these decisions are difficult and may not be well-received internally. However, she emphasized that this move is necessary for the benefit of the shareholders.
The announcement of the management changes led to a 1.7% increase in Citigroup’s shares. Chief Financial Officer Mark Mason also stated that the company’s expense guidance for the year remains unchanged.
This reorganization is part of Fraser’s strategy to boost profits and simplify the bank since taking on the role of CEO in 2021. While Citigroup has sold off some businesses and addressed regulatory issues, its stock price lags behind its competitors.
The bank is still working to address a consent order from regulators in 2020, which highlighted several deficiencies in its internal controls.
As part of the changes, Citigroup has appointed new heads for different divisions, such as services, markets, investment and corporate banking, U.S. consumer banking, and wealth management. The bank also plans to hire externally for the banking head position. Furthermore, Ernesto Cantu has been named the new head of international to oversee non-U.S. businesses.
The reorganization has resulted in the elimination of 35 committees, aiming to reduce bureaucratic processes in the bank. Fraser expects that these changes may lead to some employees choosing to leave the organization.
Fraser emphasized that these changes will increase accountability within the organization and is determined to achieve the bank’s goals.
Despite the rise in shares following the announcement, Citigroup’s stock remains undervalued compared to its book value and its competitors such as Wells Fargo, Bank of America, and JPMorgan Chase.
Analysts suggest that investors will closely monitor the bank’s financial performance and achievements of its goals to gain confidence in its stock. However, they also noted that the current management team remains in place, implying that the changes may be seen as relatively subtle.
Separately, Chief Financial Officer Mason expects the bank’s trading revenue to increase in the low single digits in the third quarter, while investment banking revenue is expected to remain flat or slightly rise.
