Despite challenges, CEO Fraser sticks to Citi’s turnaround plan

Citigroup CEO Jane Fraser is sticking to the megabank’s turnaround plan in the face of ongoing challenges, including potential economic downturns here and abroad and new reports that last month’s “fat finger” error at a London trading desk could wind up costing Citi millions of dollars.

On Friday, Fraser reaffirmed the $2.4 trillion-asset company’s multiyear plan to expand businesses such as wealth management and treasury and trade solutions that have solid growth prospects, while cutting others that are too small for Citi to scale. Fraser and other Citigroup executives initially laid out their vision during an investor day three months ago. 

Jane Fraser, CEO of Citigroup, said she “wouldn’t change a thing” about the company’s turnaround plan outlined back in March.

“I wouldn’t change a thing” about what Citi outlined in March, Fraser said at the Bernstein Strategic Decisions Conference in New York. “We deliberately made sure and took the time that it would be one that would work in all different environments and be sustainable.”

Since Fraser took over as CEO in March 2021, the New York bank has been on a mission to improve shareholder returns by simplifying and concentrating on high-growth-potential businesses. For years, it has lagged other big banks when it comes to return on tangible common equity, which came in at 10.5% during the first quarter, compared with 16% at JPMorgan Chase.

Citi’s overhaul involves seizing growth opportunities in services, commercial banking and wealth management; collecting more share in the fixed income and equities markets, banking and U.S. personal banking businesses; digitizing and automating its operating model; enhancing risk controls; and reshaping itself into a leaner organization, in part through consumer-related divestitures.

The divestiture strategy — which will see Citi sell or close consumer businesses in 14 overseas markets including Mexico, China, Russia and Thailand — moved forward this week with the completion of the sale of Citi’s Australian consumer franchise to National Australia Bank. 

At the same time, Citi’s risk management and internal controls systems remain under regulatory scrutiny. The company, which mistakenly paid $900 million to creditors of the cosmetics company Revlon in 2020, received a pair of consent orders later that year from the Federal Reserve and the Office of the Comptroller of the Currency, which identified “deficiencies” with the bank’s current systems. Simultaneously, the OCC issued a $400 million civil money penalty.

The bank has since been investing heavily in technology and other areas to clean up and automate the systems, but there have been bumps in the road. In May, a trader in London accidentally added an extra zero to a trade, resulting in a flash crash in European stocks.

The mistake could cost Citi at least $50 million, Bloomberg reported Thursday.

Still, Fraser sounded upbeat Friday about the bank’s plans and its ability to weather challenges, be it the impacts of Russia’s invasion of Ukraine or potential recessions in Europe and the United States. She said Europe appears more likely to be heading into a recession than the U.S.

Citi is running “multiple different scenarios” to prepare for whatever happens next, Fraser said.

“You never want to be complacent, but we’re very well prepared,” she said. “The toolkit’s ready.”

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