Citigroup considers deep job cuts at Project Bora Bora

When Citigroup CEO Jane Fraser announced in September that her corporate shakeup would result in an undisclosed number of layoffs, fear struck many of the bank’s 240,000 souls.

“We will be saying goodbye to some very talented and hard-working colleagues,” he warned in a note.

The employees’ concern is justified. Managers and consultants working on Fraser’s restructuring — internally codenamed “Project Bora Bora” — have discussed job cuts of at least 10% in several key businesses, according to people with knowledge of the process. Negotiations are early and the numbers could change in the coming weeks.

Fraser is under increasing pressure to fix Citigroup, a global bank so difficult to manage that its challenges consumed three predecessors dating back to 2007. is already backward. Each metric Importantly for investors, since Fraser took over in early 2021, the bank has lagged further behind rivals. It trades at a price-to-book value ratio of 0.49, a third of the valuation and less than half the average of US peers. Top performers including JP Morgan Chase.

“The only thing she can do at this point is really cut a significant figure.” James Shanahan, an Edward Jones analyst, said in an interview. “She’s going to have to do something big, and I think there’s a good chance it’s going to be bigger and more painful for City staff than they expect.”

If Fraser decides to part ways with 10% or more of its workforce, it will be one of Wall Street’s deepest layoffs.

Burdened by regulatory demands that precipitated the retirement of his predecessor, Mike Corbett, Citigroup’s costs and headcount ballooned under Fraser. While rivals cut jobs this year, Citigroup’s workforce remained at 240,000. It also has the largest workforce of any US bank except the larger and more profitable JPMorgan.

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

The stock is the third-largest bank in the U.S. by assets. That’s because after decades of stock underperformance, missed targets and shifting goal posts, Fraser is taking the steps analysts have long called for. Failure will mean renewed calls to unlock value by taking even more drastic measures, such as liquidating the company.

Fraser has pledged to boost Citigroup’s earnings to at least 11% over the next few years, a key target to help the bank’s stock recover. To get close, Citigroup will need to increase revenue, use its balance sheet more efficiently and cut costs. But revenue growth may be hard to come by as the US economy slows, according to analysts, the biggest lever to cut spending.

“No investor I’ve talked to thinks they’ll hit that income target in ’25 or ’26,” Mike Mayo, an analyst at Wells Fargo, said in an interview. “If they can’t generate a return above their cost of capital, which is usually about 10%, they have no right to stay in business.”

Fraser put Up to the goal, chairman of Citigroup’s legacy owners, is in charge of the restructuring, according to the sources. Cole joined Citigroup in 2020 and is a veteran of Wells Fargo and Bank of America, companies that have wrestled with costs and headcount in the past.

Boston Consulting Group plays a key role. Consultants are involved in mapping the bank’s organizational charts, monitoring key performance metrics and making recommendations.

Although the project’s codename evokes the turquoise waters of Tahiti, staff have been quiet since Fraser’s September announcement.

“Morale is super, very low,” said one banker who recently left Citigroup and was contacted by former colleagues. “They say, ‘I don’t know if I’m getting beat up, or if my manager is getting beat up. People avoid the worst.'”

The final number of layoffs will be determined in the coming weeks as the massive plan moves from the management ranks to rank-and-file workers. But some things are already clear, according to the people, who declined to be identified talking about the secret plan.

Executives will see cuts of more than 10% because of Fraser’s push to eliminate overlapping responsibilities for regional managers, co-presidents and others, they said.

Chiefs of staff and CEOs across Citigroup, for example, will be reshuffled this month, one of the people familiar with the situation said.

Operational employees who supported divested or restructured businesses are also at high risk of layoffs, the people said.

Although Fraser has announced significant job cuts, investors will need to see the reduction in costs before they believe it. Pierre Buhler, A banking consultant SSA & Co. That’s because the industry has a track record of announcing spending plans, only to see costs climb.

However, it’s up to Fraser and his representatives to sign off on the overall plan, and they could cut spending savings. According to the current executive, the plan is primarily to remove redundant layers to better serve Citigroup customers.

The bank has only said publicly that costs will begin to fall in the second half of 2024.

Citigroup declined to comment beyond this statement:

“As we have said before, we are committed to delivering the full potential of the bank and fulfilling our obligations to our shareholders,” a spokesperson said. “We acknowledged that the steps we are taking to restructure the company involve some difficult, consequential decisions, but they are the right steps to align our structure with our strategy and deliver on the plan we shared at our 2022 Investor Day.”