Citigroup is considering deep job cuts at Project Bora Bora

When Citigroup CEO Jane Fraser announced in September that her company’s restructuring would lead to an undisclosed number of layoffs, sparking fears among the bank’s 240,000 employees.

“We will be saying goodbye to our very talented and hardworking colleagues,” he warned in the memo.

The workers’ concerns are justified. Managers and consultants working on Fraser’s restructuring — known internally by its code name, “Project Bora Bora” — have discussed job cuts of at least 10% at several major businesses, according to people with knowledge of the process. Discussions are still early and the numbers may change in the coming weeks.

Fraser is under increasing pressure to fix Citigroup, a global bank so difficult to manage that its challenges have dogged three predecessors since 2007. Already lagging on every metric that matters to investors, the bank has fallen far behind rivals since Fraser took over. in early 2021. It trades at a price-to-book ratio of 0.49, less than half the average of US peers and one-third of the valuation of top players including. JPMorgan Chase.

“The only thing he can do right now is reduce the number of people,” James Shanahan, an analyst at Edward Jones, said in an interview. “He’s got to do something big, and I think there’s a good chance it’s going to be bigger and more painful for Citi employees than they expect.”

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Citigroup’s shares have been in trouble under CEO Jane Fraser.

If Fraser decides to part with 10% or more of his employees, it would be Wall Street’s deepest layoff in years.

Pressured by legal demands that hastened the retirement of his predecessor Mike Corbat, Citigroup’s expenses and headcount have become more profitable under Fraser. While its competitors are cutting jobs this year, Citigroup’s workforce remains at 240,000. That leaves Citigroup with the largest workforce of any U.S. bank other than the giant and most profitable JPMorgan.

An update on Fraser’s plan and its financial impact will come in January along with fourth-quarter earnings.

Constant doubt

The numbers are high for America’s third largest bank by assets. That’s because, after decades of stock underperformance, misses and changing goalposts, Fraser is taking the steps analysts have long sought. Failure could mean renewed calls to unlock value by taking more drastic measures like liquidating the company.

Fraser has vowed to increase Citigroup’s cash return to at least 11% over the next few years, a key goal that will help the bank’s stock recover. To break even, Citigroup needs to increase revenue, use its balance sheet more efficiently and reduce costs. But revenue growth may be difficult to achieve as the US economy slows, leaving spending a major drag, according to analysts.

“Not one investor I’ve talked to thinks they’re going to hit that target in ’25 or ’26,” analyst Mike Mayo Wells Fargo said in the interview. “If they can’t generate a return that exceeds their cost of capital, which is about 10%, they have no right to stay in business.”

Fraser has put Titi Cole, head of Citigroup’s legacy franchise, in charge of the restructuring, according to sources. Cole joined Citigroup in 2020 and is a veteran of Wells Fargo and Bank of Americainstitutions that have previously dealt with costs and censuses.

The Boston Consulting Group also has an important role. The experts were involved in drawing the bank’s organization charts, tracking key performance metrics and making recommendations.

Low behavior, high anxiety

Although the project’s code name has stirred up blue waters in Tahiti, workers have been quiet since Fraser’s September announcement.

“Morale is super, super low,” said one businessman who recently left Citigroup and has been contacted by former colleagues. “They said, ‘I don’t know if I’m being beaten, or if my boss is being beaten.’ People are looking for the worst.”

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The final number of layoffs will be determined in the coming weeks as the massive project moves from management ranks to rank-and-file employees. But some things have become clear, according to the people, who declined to be named about the secret operation.

Managers will see cuts of more than 10% due to Fraser’s push to eliminate district managers, associate heads and others with related responsibilities, they said.

For example, chiefs of staff and senior management officers across Citigroup will be cut this month, said one of the people with knowledge of the situation.

Support workers for businesses that have been laid off or reorganized are at high risk of being laid off, the people said.

Citi’s statement

Even if Fraser does announce major layoffs, investors will likely need to see the cost reductions before they believe them, said Pierre Buhler, a banking consultant at SSA & Co. That’s because of the industry’s history of announcing cost plans only to see costs. go up.

Still, it’s up to Fraser and his deputies to opt out of the plan as a whole, and they may choose not to emphasize cost savings. The project is about removing unnecessary layers to help Citigroup better serve clients, according to the executive.

Publicly, the bank said costs would begin to ease in the second half of 2024.

Citigroup declined to comment beyond this statement:

“As we have said before, we are committed to bringing the bank full strength and fulfilling our obligations to our partners,” said the spokeswoman. “We realized the actions we are taking to restructure the company involve difficult, step-by-step decisions, but they are the right steps to align our structure with our strategy and deliver the plan we are sharing on Investor Day 2022.”

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