Citigroup’s Executive Reshaping, CEO Fraser Addresses Managing Directors Amidst Leadership Overhaul After Previous 20,000 Job Cuts Over Two Years

Citigroup CEO Jane Fraser conducted a conference call on Thursday with managing directors to discuss the extensive overhaul of the bank.

This week, the bank continued its restructuring efforts by eliminating additional leadership positions. The sources and two others familiar with the matter disclosed that managers in markets, risk, and investment banking were informed of their departures.

According to sources, some managers were notified that their roles would cease to exist as of February 1. Further details regarding the layoffs and severance packages are expected to be announced next week.

The bank had previously announced plans to cut 20,000 jobs over the next two years following a challenging fourth quarter that resulted in a $1.8 billion loss due to one-off charges.

While Citigroup has been periodically updating stakeholders on the job cuts, there is keen interest from investors and employees in the specific timing and details surrounding the organizational changes, particularly regarding the call led by CEO Fraser, which had not been previously reported.

What’s The Plan
In the call with managing directors, Fraser covered various aspects of the reorganization and outlined the broader plan for cutting 20,000 jobs over the next two years.

The source stated that Fraser mentioned a headcount reduction of 5,000 people in the ongoing reorganization, another 5,000 through the divestiture of businesses, and an additional 10,000 from support functions like technology and operations.

Citigroup‘s plan to cut approximately 8% of its workforce ranks among the most substantial layoffs on Wall Street in recent years. The overhaul aligns with Fraser’s strategy to streamline the bank, enhancing returns and share prices.

Concurrently, the third-largest U.S. bank is addressing a 2020 consent order by regulators, mandating corrections to “longstanding deficiencies” in internal controls.

Jagdish Rao has been appointed as the regulatory reporting and remediation head, reporting to finance chief Mark Mason and Chief Operating Officer Anand Selvakesari, as outlined in an internal memo.

Rao’s most recent role was chief administrative officer for the personal banking and wealth management business.

The Story So Far
Citigroup has announced plans to cut 20,000 positions, aiming to achieve cost savings of up to $2.5 billion as part of CEO Jane Fraser’s efforts to enhance the financial institution’s lagging returns.

The firm anticipates firmwide expenses to decrease to a range of $51 billion to $53 billion by the end of 2026. However, during the ongoing restructuring, Citigroup foresees incurring up to $1 billion in expenses related to severance payments and the bank’s reorganization led by Fraser.

The optimistic outlook for cost savings serves as a counterbalance to Citigroup’s disappointing fourth-quarter performance. Fixed-income traders faced their weakest results in five years, with the rates and currencies business impacted by a decline in client activity towards the year’s end, resulting in a 25% revenue decrease to $2.6 billion.

Fraser acknowledged the challenges, stating that the fourth quarter was notably disappointing but expressed confidence that 2024 would mark a turning point in Citigroup’s trajectory.

The 20,000 job cuts are part of a broader restructuring initiated by Fraser in September, aiming to streamline the organization by reducing management layers from 13 to eight.

Further job eliminations are set to commence the week of January 22, with the restructuring expected to conclude by the end of the first quarter as already witnessed in the latest development.

This initiative alone is projected to save Citigroup $1 billion annually, with 5,000 managerial roles primarily being eliminated.

Fraser emphasized the importance of thoughtful decision-making in the restructuring process, considering factors such as the right structure, talent, and overall goals of simplifying the firm. She reiterated the goal of achieving a return on tangible common equity of at least 11% by 2027 at the latest.

In Quest Of Profits
In pursuit of improved returns, Citigroup has made strategic decisions, including the closure of its municipal business and distressed-debt trading unit. The bank remains open to exiting additional businesses within its markets division if they do not align with the go-forward strategy.

Citigroup’s firmwide headcount is expected to decrease by 60,000 jobs to 180,000 by the end of 2026, including the 40,000 staff members departing through an initial public offering of its consumer, small business, and middle-market banking businesses in Mexico.

The fourth-quarter results for Citigroup revealed a $1.8 billion loss, or $1.16 per share, encompassing various one-time items such as a $780 million charge related to severance offered to employees affected by the restructuring.

Additionally, the company recorded a $1.7 billion charge to cover a special assessment for the Federal Deposit Insurance Corp.’s replenishment after several bank collapses last year.

The Viewpoint
The restructuring plan, initiated in September, is a critical component of Fraser’s vision to simplify Citigroup’s structure, reducing management layers and bureaucracy.

The announcement comes on the heels of a disappointing fourth quarter marked by a $1.8 billion loss, driven by one-time charges and challenges faced by the fixed-income traders.

However, despite the setbacks, Citigroup’s outlook remains optimistic, with Fraser affirming that 2024 is poised to be a turning point for the institution.

The cost-saving measures are expected to result in firmwide expenses ranging from $51 billion to $53 billion by the end of 2026.

While the restructuring incurs upfront costs of up to $1 billion, Fraser emphasizes the long-term benefits, with the potential to save $1 billion annually through the streamlined operations.

The reduction of 5,000 managerial roles is a crucial aspect of this initiative, contributing to a leaner and more efficient organizational structure.

In addition to job cuts, Citigroup’s strategic decisions include exiting certain businesses, such as the municipal business and distressed-debt trading unit.

The bank is open to further divestments within its markets division if they align with the overarching strategy, the rationale behind these decisions, and their implications for Citigroup’s market positioning and profitability.

The Last Bit, As Citigroup embarks on this bold restructuring journey, the institution faces both challenges and opportunities.

The commitment to streamlining operations, reducing costs, and refocusing on core strengths is expected to pave the way for sustained growth.

CEO Jane Fraser’s strategic vision, outlined in the midst of a challenging financial situation, sets Citigroup for a transformative period.