Jane Fraser Refreshes at Citigroup

But Citigroup, formerly the world’s largest financial services company, is struggling to keep up with competitors. While Goldman Sachs Group Inc.

and Morgan Stanley are reaching new highs in market value. Citigroup’s is half of what it was in 2006. Its profits and revenue, which were once more than double those of other major banks, are now owned by JPMorgan Chase & Co. and Bank of America Corp. Last fall, regulators ordered the overhaul of major systems that support the expansion of its operations, raising new questions about the complexity of the bank.

Fraser, the first woman to run a large U.S. bank, must now raise the $ 2.3 billion giant.

She will have to respond to the concerns of regulators – an expensive, multi-year project – with a reassessment of the bank’s strategy. Fraser, 53, has already launched a “refreshment” that he hopes can simplify the bench inside and out, making it easier to manage and improve.

The simplification of Citigroup is a similar path as its predecessors, Michael Corbat and Vikram Pandit, both tried. But Fraser believes there is more to do.

“I’m not looking for what’s wrong,” Fraser said in an interview. “I’m looking for what Citi is going to be and what works.”

What Citigroup is today is part of the trouble.

The bank is a giant in Wall Street, serving multinational corporations and credit cards. It is second class in US consumer banking.

Yields tend to increase with consumer banking services, and competitors Bank of America and JPMorgan have boosted their retail operations with thousands of branches in cities across the country. Citigroup has fewer than 700 branches in just a handful of cities, but is betting on a future of strong digital banking, including an upcoming partnership with Google.

Citigroup’s power comes from its global corporate bank. It operates in 96 countries, helping governments and corporations move money around the world. It is also a leader in acquiring corporate debt and trading it on Wall Street. But those businesses are not earning as high a return as they used to be, under pressure from the crisis period.

The combination outperformed competing mega-banks, which kept profits high with a better balance between their Wall Street and Main Street businesses. Analysts and investors have argued that Citigroup needs to restructure, with proposals such as eliminating all its international consumer operations or buying a US bank. Activist investor ValueAct Capital has called for changes to focus on institutional issues.

“There is little doubt that the two-decade experiment at Citigroup has failed in every way,” said Mike Mayo, a longtime banking analyst and critic of Citigroup.

Fraser did not telegraph her plans, but executives said the strategic review would bring significant changes. Citigroup recently announced an expansion of its wealth management operations. According to people familiar with the matter, the bank is likely to shake off its consumer operations in parts of Asia, including South Korea and Vietnam. According to one of the people, it does not intend to retire from institutional banking in any country.

Mark Mason, chief financial officer, said decisions would not be based solely on the financial return criteria that have driven the conversation through Citigroup for years.

“I think what our investors are listening to: tell us how and why the strategy you came up with makes sense,” he said. Mason said. “Then tell us what it means in returns.”

But it is unclear whether the immediate plans will be enough to appease critics. The order for regulatory consent may currently preclude any substantial acquisition. Some investors and analysts want Citigroup to abolish its consumer bank in Mexico or do the stock trading, which has not grown as expected. According to people familiar with the bank’s plans, this is probably not the case at the moment.

Fraser said the Mexico Consumer Bank, which was dragged through fraud allegations a few years ago, has an amazing scope, an important barometer for their review. Getting rid of the business will be expensive because the unit on Citigroup’s balance sheet is linked to a lot of goodwill. With stock trading, executives say the benefits to customer relationships are too great, even if investors can’t see it.

This could soon make investors hope for a second round of restructuring.

Today’s Citigroup was founded in 1998, a merger of the consumer-oriented Citicorp and the high-flying Wall Street bankers at Travelers Group. Managers envisioned a one-stop mega bank where companies could manage their finances and travelers jumping around the world could always find an ATM ATM.

But Citigroup’s businesses continued to operate as silos, and the merger benefits did not materialize as hoped. The bank has repeatedly insulted the regulators. During the financial crisis, it almost collapsed under the weight of toxic effects associated with mortgage lending. Since then, he has sold assets he considered too risky or too complementary, such as a British music empire, a stake in a Mexican airline, a subprime lender and the Smith Barney brokerage.

Fraser joined Citigroup in 2004 after Goldman Sachs and McKinsey & Co. During the financial crisis, she managed the bank’s strategy department, thus laying the foundation for the sale of assets.

She jumped from job to job, managing Citigroup’s private bank for the ultra-rich, battered mortgage unit and scandal-stricken operations in Latin America. This has given her experience with many parts of the business, although some people find it difficult to judge her operational success.

People who worked with her said that she makes quick decisions and that she can think strategically in the long run while also running a business. Even when she cut work, they said, she wrapped her messages in empathy.

She is also known for practical jokes. In January, when Mr. Mason reported at the executive team’s Zoom meeting this morning, he found all his colleagues sitting in front of a 20-year-old picture of him. It was his anniversary at Citigroup. Fraser kept it as her backdrop all day.

Citigroup announced in September that it would be CEO. Regulators have increased the pressure on the bank’s risk management systems, and Mr. Corbat decided to retire because he believed such an expensive, multi-year project would best be left in the hands of a successor.

Fraser said the regulatory issue is her top priority. The bank held on to a February deadline to diagnose its risk problems, and executives said the relationship with regulators is productive. She described the work as a ‘transformation’, an opportunity for the bank to make overdue and competitive changes.

Regulators, for example, have complained that the bank does not have clear information about customers. Citigroup has never built a unified customer identification system in all of its businesses. The correction says regulators will correct and help bankers deepen their customer relationships.

Fraser said she knows the job will be a hefty lift, but that she does not expect her first day as CEO to feel any different. She is scheduled for a town hall, a meeting with new employees and some customer calls. She also plans to call some former colleagues and others to say thank you.

Write to David Benoit at [email protected]