US Markets
Monday, November 6th, 2023 2:53 pm EDT
Key Points
- Citigroup CEO Jane Fraser is considering a significant corporate overhaul that may result in layoffs, with discussions about job cuts of at least 10% in several major businesses. These discussions have raised concerns among employees.
- Citigroup has been facing challenges and underperforming in comparison to its competitors since Fraser took over in early 2021. The bank’s stock trades at a low price-to-tangible book value ratio, and there is mounting pressure on Fraser to address these issues.
- Fraser’s goal is to boost Citigroup’s returns to at least 11% in the next few years, and achieving this target requires increasing revenue, using the balance sheet more efficiently, and cutting costs. The bank’s plan for restructuring and cost reduction will be revealed in January, with the ultimate number of layoffs to be determined in the coming weeks. Investors are closely watching to see if the bank can deliver on its commitments and improve its performance.
Citigroup’s CEO, Jane Fraser, is facing increasing pressure to address the bank’s ongoing challenges, which have persisted through several predecessors since 2007. Since Fraser took over in early 2021, Citigroup has fallen further behind its rivals in terms of performance and valuation, trading at a significantly lower price-to-tangible book value ratio. To remedy this situation, Fraser is considering a substantial headcount reduction, with discussions of job cuts of at least 10% in several major business areas.
Citigroup’s expenses and headcount have increased under Fraser’s leadership, and the bank now has the largest workforce of any American bank, apart from JPMorgan Chase. To boost Citigroup’s returns, Fraser has set a target of at least 11% in the next few years, which is crucial for the bank’s stock recovery. Achieving this goal requires increasing revenue, using the balance sheet more efficiently, and cutting costs, with cost reductions being the most significant lever to pull in the current economic environment.
Fraser has placed Titi Cole in charge of the reorganization, with Boston Consulting Group playing a key role in mapping out the bank’s organizational changes and performance metrics. Employee morale at Citigroup is reported to be low, as the workforce is anxious about potential layoffs and restructuring.
While the exact number of layoffs is yet to be determined, it is clear that executives will face cuts beyond 10%, including the elimination of regional managers and other positions with overlapping responsibilities. Operations staff supporting businesses that have been divested or reorganized are also at a higher risk of layoffs. Investors are eager to see actual expense reductions, as the banking industry has a history of announcing expense plans only to see costs rise later.
Fraser’s plan to address Citigroup’s challenges and improve its financial performance will be revealed in January, along with the fourth-quarter earnings report. Failure to achieve these targets could lead to renewed calls for more drastic actions, including dismantling the company. Citigroup has acknowledged that the reorganization will involve difficult decisions but is essential to align its structure with its strategic goals and commitments to stakeholders.
For the full original article on CNBC, please click here: https://www.cnbc.com/2023/11/06/citigroup-considers-deep-job-cuts-project-bora-bora.html
