Executives in Citigroup CEO Jane Fraser's reorganization venture have discussed job losses amounting to a minimum of 10% in a number of key businesses, say sources. Fraser's attempt at eliminating regional administrators, double-heads and others with analogous assignments will likely lead to more than 10% of job cuts. Internally known as "Project Bora Bora," the corporate reorganization has put employees on edge. It is yet early and figures could change in forthcoming weeks.
When Citigroup CEO Jane Fraser revealed in September that her sweeping corporate restructuring would necessitate job reductions, it sparked fear in the hearts of many of the bank's 240,000 personnel. Fraser acknowledged this in her memo, stating, "We'll be saying goodbye to some very talented and hard-working colleagues." Employees' worries are understandable as discussions between managers and consultants on "Project Bora Bora" - the code name given to the overhaul - have involved potential job losses of at least 10%, according to sources close to the process. Although the figures may well change in the forthcoming weeks.Fraser is facing intensifying pressure to resolve Citigroup's struggles, with the bank's difficulties having stumped three past CEOs since 2007. On top of that, it's also lagging behind its rivals since Fraser's appointment in 2021. It trades at a price-to-tangible book value ratio of 0.49, which is considerably lower than the average of US peers and one-third the assessment of JPMorgan Chase and other top performers. James Shanahan of Edward Jones pointed out, "The only thing she can do at this point is a really substantial headcount reduction. She needs to do something big, and I think there's a good chance it'll be bigger and more painful for Citi employees than they expect."
Should Fraser opt to reduce the number of her employees by 10% or more, it could be one of the most severe cuts in staffing levels that Wall Street has experienced in recent years. As a result of the stiff regulations that facilitated Corbat's leaving as the head of Citigroup, the corporation's expenses and number of personnel have greatly increased under Fraser. Although other companies have already been laying off workers this year, Citigroup's 240,000 employees still give it the second largest workforce of any American banking establishment, behind JPMorgan, which is larger and more financially successful. Further clarification on Fraser's action and its economic repercussions will be provided when the fourth-quarter earnings are reported in January.
The consequences for America's third-largest bank by assets could be dire. After years of sub-par stock returns, missed objectives and constantly shifting aims, Fraser is taking steps that analysts have been advocating for a long time. Lacking success could lead to fresh calls for even more drastic measures, such as breaking the company up, being put forth. Fraser has committed to elevating Citigroup's returns to at least 11% in the upcoming years, an essential aim to help restore the bank's stock. To get close, Citigroup needs to raise revenue, employ its balance sheet more resourcefully and trim expenses. Unfortunately, revenue expansion might be hard to achieve as the U.S. economy stagnates, which leaves the largest control to tug on being cost reductions, as per analysts. "I have not spoken to one investor who believes they will reach that return target by 2025 or 2026," Mike Mayo of Wells Fargo said in an interview. "If they can't produce returns beyond their cost of capital, which is generally around 10%, they have no business remaining operational."
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Fraser put Titi Cole, who had joined Citigroup in 2020 and was a veteran of Wells Fargo and Bank of America (institutions that had previously dealt with expenses and headcount), at the helm of the reorganization, as per sources. Additionally, the Boston Consulting Group provides an important role as it is involved in creating the bank's organization charts, monitoring key performance metrics and proposing suggestions.
The project title is reminiscent of the tranquil seas of Tahiti, yet since Fraser's proclamation in September, the atmosphere among employees is anything but placid. A banker who recently departed Citigroup and was subsequently contacted by other previous staff members reported, "Morale is really, really poor. They're questioning whether they or their boss is going to be affected. People expect the worst."
The number of layoffs to be ultimately reached will be identified in the weeks to come, as the project progresses from management personnel to the lower rank worker. This much is assured, according to sources who wished to remain anonymous regarding the confidential project. Executives will be affected more than 10%, courtesy of Fraser's bid to remove regional managers, and those with identical roles, they said. One of the informed individuals declared that chiefs of staff and chief administrative officers across Citigroup are likely to suffer cutbacks this month. Furthermore, operations staff who served business that have been sold off or rearranged stand a greater chance of being laid off, the sources added.
Despite Fraser's possible announcement of job cuts, investors may need to witness decreased expenditures to be persuaded, according to Pierre Buhler, a banking consultant with SSA & Co. This is because of the industry's trend of declaring plans to reduce expenses and then having those costs climb. It is up to Fraser and her team to approve the overall strategy, and they might prefer to decrease spending less. The project is mainly about eliminating excessive levels to assist Citigroup in providing better service to customers. Officially, the bank has stated that expenditures will begin to decline in the second half of 2024. When contacted, Citigroup refused to issue further comment aside from this statement:"As we've said before, we are dedicated to achieving the full potential of the bank and fulfilling our commitments to our stakeholders," said a spokeswoman. "We've acknowledged the moves we're making to reorganize the firm involve some tough, consequential decisions, but they're the right steps to bring our structure into alignment with our strategy and carry out the plan we shared during our 2022 Investor Day."
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