Citigroup CEO institutes sweeping management changes and job cuts

NEW YORK, Sept 13 (Reuters) – Citigroup (CN) will Stripping away a layer of management The job cuts are in a sweeping reorganization that will give CEO Jane Fraser more direct control as she seeks to streamline the Wall Street giant and boost its stock.

The bank’s five division heads will report directly to the CEO, and the bank will also reduce regional leadership roles outside of North America. Job cuts are expected, but the number and financial impact remain unclear.

“We have made difficult, consequential and difficult decisions here,” Fraser told investors in New York on Wednesday. “It will not be universally popular within our bank. That will make some of our people very uncomfortable. I’m completely OK with that… It’s absolutely the right thing to do for our shareholders.”

Shares rose 1.7% after Chief Financial Officer Mark Mason said he would keep the company’s expense guidance unchanged for the year.

The sweeping reorganization is another step in Fraser’s strategy to improve earnings and simplify the bank since she took the helm in 2021. Although Citi has sold businesses and is working to fix regulatory issues, its stock price has lagged behind peers.

The third-largest U.S. bank is still dealing with a 2020 consent order by regulators requiring it to correct several “long-standing deficiencies” in its internal controls.

New department heads

Citi has appointed Shahmir Khaliq as head of its services unit, Andrew Morton in markets, Peter Babbage in investment and corporate banking on an interim basis, Gonzalo Lucchetti in US consumer banking, and Andy Sage in wealth when he joins the company later this month.

“Citi will eliminate unproductive layers of management and reorganize with a flat structure that will certainly create savings on the balance sheet,” said Brian Mulberry, a client portfolio manager at Zacks Investment Management, who owns Citi shares.

The bank is looking to recruit external staff for the position of Head of the Bank. It will work to integrate non-US companies under the leadership of Ernesto Cantu, its new head of international affairs. It eliminated layers of management in what was known as the institutional client group, which had previously been its largest division, personal banking and wealth management.

The changes eliminated 35 committees, Fraser said, citing an example of efforts to reduce bureaucracy.

Fraser said in a memo to staff seen by Reuters that the reshuffle would likely lead to a departure. A town hall will be held next week.

The new department heads will make decisions about the second and third tiers of management, which are expected to be announced in November and January, according to three sources familiar with the matter who declined to be identified to discuss personnel matters.

“All of this, ultimately, increases accountability in the organization,” Fraser told investors.

Low rating

Although shares rose on Wednesday, they are still valued at less than half their book value, while rivals such as Wells Fargo (WFC.N) and Bank of America (BAC.N) are above 0.8, and JPMorgan Chase (JPM) n) at 1.4.

“Investors will only give credit to Citigroup for hard numbers that meet their goals,” said Eric Compton, a banking analyst at Morningstar. “These changes appear to be fairly subtle, with all the key players from 2022 still in place.”

Separately, CFO Mason said he expects the bank’s trading revenue to rise by a percentage in the low single digits in the third quarter, while investment banking revenue will be flat or rise slightly.

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