Citigroup's Performance Under Scrutiny: CEO Jane Fraser Faces Mounting Pressure

Citigroup CEO Jane Fraser's leadership faces challenges as the bank's financial performance struggles to meet ambitious targets, amid strategic restructuring and market skepticism.

‘We are on a deliberate path,’ Citi chief Jane Fraser told analysts in October. ‘We’re making the progress that we need to’ © Valerie Plesch/Bloomberg/ Financial Times

Citigroup, one of the world's leading financial institutions, is under intense scrutiny as CEO Jane Fraser strives to meet ambitious performance targets amid a complex economic landscape. Appointed in 2021 as the first female CEO of a major Wall Street bank, Fraser embarked on a comprehensive restructuring plan to enhance profitability and streamline operations.

Strategic Overhaul and Challenges

Fraser's strategy has involved significant organizational changes, including the division of the bank into five distinct business units—services, trading, personal banking, banking, and wealth management. This restructuring aims to increase management accountability and operational efficiency. Additionally, Citigroup has been executing a series of job cuts, with plans to reduce its workforce by approximately 20,000 roles by 2026, targeting annual savings of $1 billion.

Despite these efforts, Citigroup's financial performance has lagged behind its competitors. In 2023, the bank reported a 38% decline in net income, with diluted earnings per share falling by 42%. The return on tangible common equity (ROTCE) for the third quarter of 2024 stood at 7%, significantly below the 11-12% target set for 2026 and trailing behind rivals such as JPMorgan Chase and Bank of America.

Analyst Perspectives

The financial community has expressed skepticism regarding Citigroup's ability to achieve its stated goals within the projected timeline. Analysts forecast a ROTCE of just over 9% for the upcoming year, casting doubt on the effectiveness of Fraser's overhaul initiatives. Despite these concerns, some analysts maintain a positive outlook. Wells Fargo, for instance, has labeled Citigroup's stock as a "dominant pick," predicting that its value could double within three years, citing factors such as increasing profits, moderated expenses, and the ongoing restructuring efforts.

Investor Sentiment and Market Performance

Investor confidence remains cautious. Citigroup's shares continue to trade below tangible book value, indicating persistent market wariness. While the stock experienced a 14% gain in 2023, it still underperforms compared to peers, reflecting the market's wait-and-see approach toward Fraser's leadership and the bank's transformation strategy.

Leadership and Compensation

Amid these challenges, Fraser's leadership has been both commended and critiqued. In recognition of her restructuring efforts, she received a 6% pay increase in 2023, bringing her total compensation to $26 million. However, this raise comes at a time when the bank is implementing significant job cuts, a juxtaposition that has not gone unnoticed within the industry.

Looking Ahead

As Citigroup prepares to release its fourth-quarter earnings report on January 15, 2025, all eyes are on Fraser and her executive team. The upcoming results will serve as a critical indicator of the bank's trajectory and the effectiveness of the current strategic initiatives. For Fraser, the stakes are high; the success of her leadership and the bank's future performance are inextricably linked to the outcomes of the transformative measures she has set in motion.