Citigroup (ticker: C) recently announced steps to streamline its operations under the leadership of chief executive Jane Fraser. With the market reacting positively to this news, it seems that investors are hopeful about the potential benefits.
The bank has outlined its plan to divide into five business lines, all of which will report directly to Fraser. The aim is to simplify decision-making processes and eliminate unnecessary management layers. Citigroup believes that by streamlining its organizational structure, it can drive transformation and unlock its full potential.
Fraser expressed her determination to ensure that the bank delivers on its promises. She emphasized the need to eliminate unnecessary complexity in order to create a more efficient and effective institution.
Under the new structure, the leaders of these “five interconnected businesses” will have greater influence on the bank’s strategy and execution. They will also be members of the executive management team, which is expected to enhance accountability within the organization. Additionally, Citigroup will consolidate leadership of geographies outside of North America and focus more on narrow or local-market operations. It plans to establish a new “client” organization to improve client engagement and experience across its global operations.
While these changes theoretically have the potential to increase profitability for Citigroup, the bank still faces the challenge of rebuilding credibility and mending relationships with frustrated investors. Over the past two years, Citigroup’s shares have declined by 40%, while the SPDR S&P Bank ETF (KBE) has fallen by 24% during the same period. The stock currently trades at 0.5 times its tangible book value, which is below that of its peers. Year-to-date, the stock has decreased by approximately 7%.
Fraser, who has been at the helm for almost three years, is under increasing pressure to orchestrate a turnaround for the bank. Although this management reshuffle is a step in the right direction, it may take additional measures to reignite investor confidence.