Citigroup (C.N) will reorganize to give CEO Jane Fraser more influence and raise its stock by cutting staff and removing a management layer. The bank’s five division chiefs will report directly to the CEO, while regional leadership positions outside North America will be eliminated. Job losses are likely, although their number and cost are unknown.
“We have taken hard, consequential, tough decisions here,” Fraser told New York investors Wednesday. They will not be popular in our bank. Some of our employees will be uncomfortable. That’s alright with me… Doing so is best for our stockholders.”
Chief Financial Officer Mark Mason maintained the company’s annual spending outlook, lifting shares by 1.7%.
Since 2021, Fraser has led the bank’s massive transformation to boost profitability and simplify operations. Citi has divested assets and addressed regulatory issues, but its stock price has lagged.
The third-largest U.S. bank faces a 2020 consent decree from regulators to fix “longstanding deficiencies” in its internal controls.
New division heads
Citi has appointed Shahmir Khaliq as services unit head, Andrew Morton in markets, Peter Babej in investment and corporate banking on an interim basis, Gonzalo Luchetti in U.S. consumer banking, and Andy Sieg in wealth later this month.
“Citi will cut out non-productive layers of management and reorganize with a flatter structure that will certainly create balance sheet savings,” said Zacks Investment Management Client Portfolio Manager Brian Mulberry, who owns Citi shares.
The bank is hiring outside for the banking head. It will concentrate on non-U.S. operations under Ernesto Cantú, its new international CEO. It cut managerial layers in its main segment, Institutional Clients Group, and Personal Banking and Wealth managerial.
Fraser noted that the revisions removed 35 committees to minimize bureaucracy.
Fraser told staff in a letter obtained by Reuters that the reorganization may lead to departures. She has a town hall next week.
Three persons familiar with the subject who declined to be named discussing personnel concerns said the new division heads would decide on the second and third levels of management in November and January.
Fraser told investors, “All of this, at the end of the day, is increasing accountability in the organization.”
Despite gaining on Wednesday, shares are still at less than half of their book value, compared to Wells Fargo (WFC.N), Bank of America (BAC.N), and JPMorgan Chase (JPM.N) at 0.8 and 1.4, respectively.
“Investors will only credit Citigroup for hard numbers meeting their goals,” said Morningstar banking analyst Eric Compton. These adjustments appear nuanced—all 2022 main actors are still in place.”
In the third quarter, CFO Mason expects trading revenue to grow by a low single-digit percentage and investment banking revenue to be steady or slightly higher.