Citigroup CEO Announces Restructuring and Layoffs as Stock Slump Persists
Key takeaways
- Citigroup’s CEO has announced top-down reforms to the bank’s management
- Five new divisions have been created and job cuts are on the way in the coming months
- Citigroup’s share price was up 2.3% on Wednesday
Times are changing at banking giant Citigroup. Its CEO has just announced sweeping reforms to its management structure and job cuts as the ailing bank looks to bolster its flagging share price and cut down on the many layers of bureaucracy investors have criticized Citi for in the past.
The moves won’t be popular, and the CEO has said she’s fine with that. Wall Street was happy enough with the announcement too, with the share price rising on Wednesday. Let’s get into what exactly Citi is cooking up with its management change, and how investors reacted to the news.
What’s happening at Citi?
Citigroup has confirmed it’s taking the bank in a new management direction to streamline its operations and improve performance. CEO Jane Fraser confirmed Citi would be dividing into five business lines, all reporting to Fraser, and will cut regional leadership jobs outside of North America.
Under the new structure, the new division heads will decide over Citigroup’s second and third layers of management job cuts in November and January. It’s also eliminated 35 committees and will consolidate its non-U.S. business under one head of international.
Fraser first came to the top job in 2021, with the bank still struggling with a 2020 regulatory order to correct “longstanding deficiencies” in its internal controls. Since Fraser has been CEO, Citi has also tried to consolidate its position by selling off businesses, such as divesting its Taiwan consumer business to DBS last year.
In a press conference, Fraser said she anticipates resignations under the structural shake-up. “We have taken hard, consequential, tough decisions here,” Fraser told investors in New York on Wednesday. “They are not going to be universally popular within our bank. It’s going to make some of our people very uncomfortable.”
What was the market reaction?
Citi’s share price climbed as much as 2.3% during Wednesday trading and has risen 4.39% since the start of this week, in a sign Wall Street approved of Fraser’s drastic new approach. That’s gone some way to narrow the 7.45% loss the stock has seen since the start of the year, but Citigroup shares have plunged 40% in the last two years.
Citi’s CFO, Mark Mason, further reassured investors, saying he was keeping the company’s expense guidance the same for the year. Citigroup has also reaffirmed its other yearly targets announced at the 2022 investor day, including a return on tangible equity between 11% and 12% and an efficiency ratio below 60%.
But the stock has a long way to go before it can recover. Citigroup shares trade at around 0.5 tangible book value, which is well below peers like Wells Fargo and Bank of America, which are above 0.8, and JP Morgan, which is at 1.4.
The bottom line
Citigroup has had a tough time with its share price in the last two years, and after exploring other avenues like selling businesses off, Fraser has clearly decided enough is enough. Given the investor reaction to the news, there’s renewed hope that Citi can take the stock higher under the new management structure — though that will be more apparent in the coming months.
