Will Citigroup CEO Jane Fraser’s push to centralize control pay off?

“We have taken hard, consequential, tough decisions here … it’s going to make some of our people very uncomfortable,” Citigroup CEO Jane Fraser said Wednesday. “I am absolutely fine with that.”


Citigroup CEO Jane Fraser made one of her biggest moves yet on Wednesday, laying out plans for a major organizational overhaul that is expected to give her more control over the company’s five core businesses while also reducing the number of management layers and speeding up decision-making.

The leaders of the five businesses — markets, banking, wealth, U.S. personal banking and services, which includes the highly profitable trade and treasury services unit — are joining the executive management team and reporting directly to Fraser.

The moves, which are effective immediately, scrap Citi’s two main operating divisions, eliminating the need for individual heads of those divisions.

In addition, the $2.4 trillion-asset company said it is reducing the size of its international leadership team from three regional chiefs to one. And it plans to create a “client organization” unit that will be overseen by a newly designated chief client officer, who will focus on delivering an enterprise-wide client strategy.

The overhaul will result in job cuts in the coming months, as well as other changes that may be “unpopular,” as the reduction of management layers “cascades” down the organization, Fraser said. It comes less than a month after media reports indicated that a major reorganization was in the works.

“We have taken hard, consequential, tough decisions here … it’s going to make some of our people very uncomfortable,” Fraser said Wednesday at an industry conference, where she and Chief Financial Officer Mark Mason talked about the plan. “I am absolutely fine with that.”

Fraser did not say how many jobs are expected to be eliminated. But the next round of cuts will be implemented by Nov. 30, and final changes will be made by the end of March 2024, Fraser told employees in an internal memo that was delivered Wednesday morning.

Reactions to Fraser’s initiative, which is part of an ongoing effort to create a simpler, flatter company, and ultimately to improve lagging shareholder returns, ran the gamut from upbeat to more pessimistic.

Wells Fargo analyst Mike Mayo was in the more optimistic camp. He wrote in a research note that the overhaul appears to be “a reversal of the management structure that has weighed” the company “down for two decades.”

Mayo argued that Fraser’s plan charts a course for the long-beleaguered bank to realize greater efficiency by eliminating co-heads of certain business lines, dual-reporting systems, committees and bureaucracy.

The changes announced Wednesday will eliminate 35 committees, Fraser told analysts. “It’s collapsing these layers that we don’t need,” she said.

But Stephen Biggar, an analyst at Argus Research, expressed skepticism that Citi’s latest restructuring plan will be more successful than previous ones.

“Because of the track record here, you sort of have to put on a skeptical hat and say, ‘Is this — with an emphasis on the word this — the thing that’s really going to turn around the financial metrics that so badly need to be turned around?” Biggar said.

“Consider the restructurings that have not borne fruit,” Biggar said. Still, he added, “you can be hopeful.”

Citi’s stock price, which is down 6.3% this year, was up about 1.6% Wednesday.

In the two-plus years since Fraser became CEO, she’s moved speedily to revamp several parts of the company, the financial performance of which has consistently lagged its big-bank peers. In March 2022 — one year after being promoted — she laid out long-term plans for bolstering profits.

The vision that Fraser and her management team shared 18 months ago involved a leaner Citi that has five primary, interconnected businesses. Those remarks foreshadowed the changes that the bank unveiled on Wednesday.

The five business heads who will now report to Fraser include Shahmir Khaliq, head of services, and Andrew Morton, head of markets.

The others are Gonzalo Luchetti, who oversees the U.S. consumer banking franchise; Andy Sieg, the former head of Bank of America’s wealth management division, who will join Citi as head of wealth on Sept. 27; and Peter Babej, who will temporarily lead the banking unit, which includes investment, corporate and commercial banking.

Citi is conducting a “primarily external search” for a permanent head of banking, Fraser said.

Businesses outside of North America will be consolidated under Ernesto Torres Cantú, who has been named head of international, and who also joins the firm’s executive management team. Citi has been selling off and winding down under-performing consumer franchises in various countries.

As Citi exits those businesses, it makes sense to consolidate under a single management structure, Fraser said. By the end of the year, the bank will have sold nine of 14 international franchises, she said.

Meanwhile, David Livingstone was named chief client officer. He, too, becomes part of the new executive management team, which totals 19 executives, four of whom are women.

The two main operating divisions that Fraser’s plan eliminates are the institutional clients group, which was led by Paco Ybarra, and personal banking and wealth management, which was helmed by Anand Selva.

Ybarra has shifted to a “senior advisor” role until his previously announced retirement next year. Selva, who has also been serving as chief operating officer, will retain that role under the reorganization.

Ybarra and Selva have more than 60 combined years of tenure at Citi. They both remain on the company’s executive management team, Citi said Wednesday. Ybarra is set to retire during the first half of 2024.

Mayo wrote that Fraser’s plan “should help reduce the fiefdoms” that have plagued the company “in lieu of greater coordination.” But he acknowledged that bold action is likely to ruffle feathers internally.

“The risk for this type of move is always undesired departures and internal strife, especially with Citi’s history of too little centralized control, which this move is intended to address,” Mayo wrote.

And Fraser’s intent to “deliver ‘one Citi’ with a new chief client officer is easy to say, but difficult to do despite the best of intentions,” Mayo added.

What seems clear is that it’s time for Fraser to show results, Biggar said.

“The honeymoon for Jane Fraser is over,” he said. “The Street and the board, frankly, are expecting results at this point … and now they have to take a harsher look at things that will result in more immediate improvement.”

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