By David Benoit | Photographs by Emily Assiran for The Wall Street Journal
Jane Fraser wants to simplify Citigroup Inc., the original
megabank. That won't be easy.
On Monday, Ms. Fraser takes over as chief executive of the
third-biggest bank in the U.S. Once the industry's problem child,
the bank has stabilized and built up its defenses, proving sturdy
and profitable even during the pandemic. Unlike her predecessors,
she comes to the job at a time when Citigroup is relatively under
But Citigroup, which used to be the world's largest
financial-services firm, is struggling to keep up with rivals.
While Goldman Sachs Group Inc. and Morgan Stanley are hitting new
highs in market value, Citigroup's is half of what it was in 2006.
Its profit and revenue, once roughly double that of other big
banks, have now been lapped by JPMorgan Chase & Co. and Bank of
America Corp. And last fall, regulators ordered the overhaul of
vast systems underpinning its sprawling operations, raising anew
questions about the bank's complexity.
Ms. Fraser, the first woman to run a major U.S. bank, now has to
reinvigorate the $2.3 trillion giant.
She will have to juggle responding to the regulators' concerns
-- an expensive, multiyear project -- with a reappraisal of the
bank's strategy. Already Ms. Fraser, 53 years old, has launched a
"refresh" she hopes can simplify the bank inside and out, making it
easier to run and improve.
Simplifying Citigroup is a path similar to what her
predecessors, Michael Corbat and Vikram Pandit, both tried. But Ms.
Fraser believes there is more to be done.
"I'm not looking for what's wrong," Ms. Fraser said in an
interview. "I'm looking for what Citi's going to be and what is
What Citigroup is today is part of the trouble.
The bank is a giant on Wall Street, in serving multinational
corporations and in credit cards. It is second-tier in U.S.
Returns tend to improve with scale in consumer banking, and
rivals Bank of America and JPMorgan have supercharged their retail
operations with thousands of branches in cities across the country.
Citigroup has fewer than 700 branches in just a handful of cities,
instead betting on a future of heavily digital banking, including a
coming partnership with Google.
Citigroup's power comes from its global corporate bank. It has
operations in 96 countries, helping governments and corporations
move money around the world. It is also a leader in raising debt
for companies and trading it on Wall Street. But those businesses
don't earn returns as high as they once did, squeezed by crisis-era
The combination has underperformed rival megabanks, which have
kept profits high with a better balance between their Wall Street
and Main Street businesses. Analysts and investors have argued
Citigroup needs to restructure, with suggestions such as ditching
all of its international consumer operations or buying a U.S. bank.
Activist investor ValueAct Capital has urged changes to focus on
the institutional business.
"There's little doubt that the two-decade experiment that is
Citigroup has failed in every measure," said Mike Mayo, a longtime
bank analyst and Citigroup critic.
Ms. Fraser hasn't telegraphed her plans, but executives said the
strategic review will create significant changes. Citigroup
recently announced an expansion of wealth-management operations.
The bank is likely to shed its consumer operations in parts of
Asia, including South Korea and Vietnam, people familiar with the
matter said. It doesn't plan to exit from institutional banking in
any countries, according to one of the people.
Chief Financial Officer Mark Mason said decisions won't be based
solely on the financial return metrics that have driven the
conversation around Citigroup for years.
"I think what our investors are listening for is: Tell us how
and why the strategy you've come up with makes sense," Mr. Mason
said. "Then tell us what that means in returns."
But it is unclear if the immediate plans will be enough to
appease critics. The regulatory consent order could bar any sizable
acquisition for now. And some investors and analysts want Citigroup
to shed its Mexico consumer bank or do away with equities trading,
which haven't grown as expected. Neither is likely at this time,
according to people familiar with the bank's plans.
Ms. Fraser said the Mexico consumer bank, which was dragged down
by fraud allegations several years ago, has "wonderful scale," a
key barometer for their review. Getting rid of the business would
be costly because the unit is tied to a chunk of goodwill on
Citigroup's balance sheet. With equities trading, executives say
the benefits for client relationships are too great, even if
investors can't see it.
That may leave investors hoping for a second round of
The Citigroup of today was created in 1998, a merger of the
consumer-focused Citicorp and the highflying Wall Street bankers at
Travelers Group. Executives envisioned a one-stop megabank where
companies could manage their finances and globe-hopping travelers
could always find a Citi ATM.
But Citigroup's businesses continued operating as silos, and the
merger benefits didn't materialize as hoped. The bank repeatedly
ran afoul of regulators. During the financial crisis, it nearly
collapsed under the weight of toxic mortgage-backed securities.
Since then, it has sold off assets it considered too risky or too
ancillary, like a British music empire, a stake in a Mexican
airline, a subprime lender and the Smith Barney brokerage.
Ms. Fraser came to Citigroup in 2004 after stints at Goldman
Sachs and McKinsey & Co. During the financial crisis, she ran
the bank's strategy division, helping lay the groundwork for the
She has hopped around from job to job, running Citigroup's
private bank for the ultrarich, the battered mortgage unit and the
scandal-hit Latin America operations. That has given her experience
with many parts of the company, though some people say that has
made it hard to judge her operational success.
People who have worked with her said she makes decisions
quickly, and that she can think strategically over the long term
while also running a business. Even when cutting jobs, they said,
she wraps her messages in empathy.
She is also known for practical jokes. In January, when Mr.
Mason logged into the executive team's morning Zoom meeting, he
found all of his colleagues sitting in front of a 20-year-old
picture of him. It was his anniversary at Citigroup. Ms. Fraser
kept it as her background all day.
Citigroup announced in September she would be CEO. Regulators
were ramping up pressure over the bank's risk-management systems,
and Mr. Corbat decided to step down because he felt that such an
expensive, multiyear project was best left in the hands of a
Ms. Fraser said the regulatory issue is her highest priority.
The bank delivered on a February deadline to diagnose its risk
problems and executives said the relationship with the regulators
is productive. She has branded the work a "transformation," an
opportunity for the bank to make changes that are overdue and
For instance, regulators had complained the bank lacked clear
data about customers. Citigroup had never built a unifying customer
identification system across all its businesses. Fixing that would
both appease regulators and help bankers deepen their client
relationships, executives said.
Ms. Fraser said she knows the work will be a heavy lift but that
she doesn't expect her first day as CEO to feel any different. She
is scheduled for a town hall, a meeting with new employees, and
some client calls. She is also planning to call some former
colleagues and others to say thank you.
Write to David Benoit at email@example.com
(END) Dow Jones Newswires
February 28, 2021 05:44 ET (10:44 GMT)
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