Banking

‘No dilly-dallying’: Citi’s Jane Fraser gets to work on overhaul

Jane Fraser wants to move quickly to remake Citigroup, so it makes sense that her first earnings call as CEO of the global financial powerhouse had an air of urgency.

“Let’s get cracking,” she told analysts Thursday at the start of a 90-minute first-quarter call that was largely focused on Citi’s decision to offload consumer operations in 13 overseas markets including China, India and Australia. When asked about the timing of those sales — which were announced two hours prior — Fraser said the company has started the process.

“Look, we’re already getting going,” she said. “There’s no dilly-dallying here.”

“I don’t think it’s going to take us very long to come back to everybody with a clearer view of where we’re going,” Citigroup’s Jane Fraser said on her first earnings call as CEO. “I’m looking forward to doing so and, more than anything, looking forward to getting on with it.”

Rodrigo Capote/Bloomberg

But those hoping to pry details from Fraser about what, if anything, is next on the $2.3 trillion-asset company’s chopping block will have to wait. She kept that information to herself, though she offered a few hints about what she’s likely to hang on to.

Citi’s retail unit in Mexico is “a scaled franchise” where “the returns are good and there’s a lot of upside potential [and] the investments in digitization have really paid off,” Fraser said.

“There’s a lot to like in the [Banamex] franchise over the longer term,” she said.

In the United States, where Citi has a smaller retail branch footprint than several peers, Fraser pointed to an “upside potential in wealth,” a substantial cards business and “very high-quality clients” inside and outside the branch network who have been “very digitally engaged.”

“We’ve got terrific assets and building blocks,” she said.

There might even be room to make an acquisition in the U.S., she added.

“For now, partnerships are going to be very important,” Fraser said. “But we’d love to do inorganic moves if they make sense for our shareholders and for us further down the line.”

Details of Fraser’s plans to revamp Citi in hopes of improving long-lagging shareholder returns have been highly anticipated for months. Changes began even before she officially assumed the CEO seat on March 1, with the January consolidation of two wealth management units into a single global division. They continued this week with the naming of a new global head of private banking.

‘No dilly-dallying’: Citi’s Jane Fraser gets to work on overhaul

The divestitures announced Thursday are part of a plan to “double down on wealth” by creating four wealth hubs — in London, Singapore, Hong Kong and the United Arab Emirates — and exit retail businesses in 13 countries where Citi isn’t large enough to effectively compete, Fraser said. However, Citi will keep serving customers in those countries who access Citi’s institutional clients group for private banking, cash management, investment banking and trading products.

The move “should be well received by investors” in part because those operations did not contribute to net income last year, analyst Brian Kleinhanzl of Keefe, Bruyette & Woods said in a research note.

“Overall, investors will like that Citi is simplifying and reducing complexity,” Kleinhanzl said.

To be sure, Fraser has her hands full. Citi is spending billions of dollars to overhaul its risk management and internal-controls systems. The Federal Reserve and the Office of the Comptroller of the Currency issued a pair of consent orders last fall after finding deficiencies in the company’s current systems.

The OCC imposed a $400 million civil money penalty.

In addition, the pandemic recession has put pressure on business lines including global consumer banking. Revenue for that unit tumbled 15% year over year in North America and 14% worldwide due to lower card volumes and lower interest rates.

Echoing sentiments from JPMorgan Chase a day earlier, Citi Chief Financial Officer Mark Mason said there are signs that improvement is nearing.

“While we are still seeing the impact of the pandemic and high payment rates on revenues, consumer spending continues to improve and credit remains healthy, pointing to a recovery as we move through this year,” he said.

Before wrapping Thursday’s call, Fraser reassured participants that more details are on the way.

“I don’t think it’s going to take us very long to come back to everybody with a clearer view of where we’re going,” she said. “I’m looking forward to doing so and, more than anything, looking forward to getting on with it.”


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