Citigroup Continues Reorganization Under CEO Jane Fraser

Citigroup Inc., under the leadership of CEO Jane Fraser, is undergoing further reorganization, according to recent reports.

Five Major Operating Units

Citigroup will establish five major operating units: trading, investment banking, U.S. personal banking, wealth management, and business services. These units will report directly to CEO Jane Fraser. While the plans have yet to be finalized, sources familiar with the bank have shared this information with various news outlets, including the Financial Times and Reuters.

Departure of Paco Ybarra

Paco Ybarra, current head of Citi's institutional-clients group, is leaving the company and his position will be eliminated. The institutional-clients group includes treasury and trade solutions, as well as markets and banking businesses. This change is part of the ongoing reorganization at Citigroup.

Analyst's Perspective

Richard Bove, an analyst at Odeon Capital, maintains a buy rating on Citigroup and believes that the company's stock is undervalued compared to others. He sees the reorganization as an opportunity for CEO Jane Fraser to directly assess the business units and their performance. Bove also expresses disappointment that reshaping and restructuring are still necessary after 53 years.

According to Bove, Fraser's strategy focuses on leveraging the company's existing strengths, such as core business services and trading capabilities, particularly in foreign exchange. Rather than pursuing new ventures, Fraser aims to build upon these strengths.

Future Outlook

Bove predicts that Citigroup will continue to shrink in size but emphasizes that the company possesses valuable operating skills and cash reserves. He acknowledges the ongoing transformation at Citigroup and suggests that any further changes will happen as part of this larger reorganization effort.

Citi Continues to Streamline Operations and Focus on Key Markets

Citi, one of the world's leading financial institutions, maintained a headcount of 240,000 employees at the end of the second quarter, consistent with the previous quarter. However, behind the scenes, the bank is quietly undergoing job reductions that have not yet been officially disclosed.

As part of its strategic realignment, Citi has recently signed sales agreements for nine out of the 14 retail banking markets it plans to exit. These markets include Taiwan, Australia, India, the Philippines, Thailand, and Vietnam. With a renewed focus on wealth management and commercial banking, Citi is making decisive moves to strengthen its international business.

The sale of its Taiwan consumer business to DBS Bank of Singapore will provide Citi with a regulatory capital benefit of $1.2 billion, as confirmed in a statement released on August 14. Additionally, Citi has announced plans to sell its Mexican retail unit, Banco National de Mexico S.A. (Banamex), through an initial public offering in 2025.

Citi's Chief Financial Officer, Mark Mason, revealed earlier this year the bank's intention to cut 5,000 jobs within the first six months of 2023, primarily in its banking and markets divisions. In the second quarter alone, the bank incurred severance costs of approximately $350 million as it supported 1,600 employees through this transition.

While Citi has not yet provided details on potential job cuts in the second half of 2023, it is clear that the bank remains committed to optimizing its operations for long-term success.

Despite recent weakness in the banking sector and S&P downgrades impacting bank stock performance, Citigroup's stock only slightly declined by 0.4% on Wednesday. So far this year, the stock has experienced a 9.6% decrease, contrasting with the 15.1% gain of the S&P 500 SPX and the 3.7% year-to-date increase of the Dow Jones Industrial Average DJIA.

The challenges faced by U.S. banks and regional lenders have placed downward pressure on their ratings, leading to market-wide declines in the sector.