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Can Citi’s Latest Restructuring Efforts Revive the Stock’s Fortunes?

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Citigroup Launches Restructuring Effort to Boost Shareholders

Key Takeaways

  • Citigroup CEO Jane Fraser launched a restructuring effort Wednesday, aimed at simplifying the bank’s organizational structure and transforming it into a leaner company.
  • The bank has struggled with declining financial performance and profitability, with shares down almost a third since CEO Jane Fraser took over in February 2021.
  • Citigroup shares shed 98% of their value during the 2008 financial crisis, and as of Sept. 2023 were still more than 90% below all-time highs set in 2000.

Citigroup (C) on Wednesday launched a restructuring effort, changing its organizational structure and cutting jobs as part of CEO Jane Fraser’s effort to simplify the banking giant, in a move intended to provide a much-needed boost to shareholders.

It’s an effort motivated by the bank’s declining financial performance and profitability. The bank’s profit for the quarter ended in June tumbled 36% from a year ago, driven by higher expenses and credit costs.

Shares have lost almost a third of their value since CEO Jane Fraser took over in February 2021. They have been the worst performers—by a wide margin—among the four biggest U.S. banks over this period, a group that also includes JPMorgan Chase (JPM), Bank of America (BAC) and Wells Fargo (WFC).

Image source: YCharts

What’s In the Restructuring?

Fraser’s effort is aimed at simplifying Citibank’s organizational structure and transforming it into a leaner company. The leaders of its five business units—corporate and investment banking, wealth management, transaction services, markets, and U.S. consumer banking—will report directly to the CEO, resulting in fewer management layers.

The restructuring effort could provide a much-needed boost to shareholders. Citigroup shares jumped about 2% on Wednesday. They remain down roughly 6% so far this year.

Can A Leaner Citi Boost Its Stock?

Citigroup shares were once one of the most expensive on the market, peaking at just under $600 in 2000. The company helped pioneer the modern banking industry in the late 20th century with its wealth management services, automatic teller machines (ATMs), and credit card offerings.

However, the bank’s fortunes turned shortly after that. The company spun off its insurance business in 2002 after an unsuccessful merger with The Travelers’ Companies (TRV) four years earlier. Years later, it took the full brunt of the subprime mortgage crisis of 2007 and 2008, and was forced to write off billions of dollars in bad loans and accept a government bailout. Shares of Citigroup fell a stunning 98% between May 2007 and March 2009, and as of September 2023 were still more than 90% off their all-time highs.

Citigroup has been the second-worst performing stock in the S&P 500 Index over the past 25 years as of April, faring only slightly better than insurance giant AIG (AIG), another financial institution whose shares were heavily battered during the 2008 financial crisis.

Citigroup Performance
Image source: YCharts

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