In a resolute statement, Citigroup CEO Jane Fraser affirmed that the financial giant is resolutely committed to its transformative journey. Fraser, who assumed her role in March 2021, unveiled a sweeping reorganization plan aimed at fundamentally reshaping Citigroup's operations and bolstering its profitability. The plan, which includes consolidating key businesses and streamlining decision-making processes, marks Fraser's boldest move since taking the helm.
Fraser's vision is clear: she aims to enhance the firm's efficiency, boost shareholder rewards, and close the profitability gap that has persisted for years. Citigroup, with assets totaling $2.4 trillion, is targeting an efficiency ratio of less than 60%, a common equity tier 1 capital ratio between 11.5% and 12%, and a return on tangible common equity ranging from 11% to 12%.
The organizational overhaul, initiated just one month ago, grants Fraser greater influence over Citigroup's five core businesses while eliminating redundant workstreams and expediting decision-making. Notably, heads of crucial divisions now report directly to Fraser, solidifying her role in the executive management team.
Concurrent with the reorganization, Citigroup is divesting from 14 global consumer franchise businesses, resulting in significant job reductions, including regional manager positions. The sale of its consumer business in Taiwan and wealth management arm in China to HSBC exemplifies this strategic shift.
Chief Financial Officer Mark Mason disclosed that severance expenses will reach $600 million in 2023 following the elimination of 7,000 jobs. Although Mason did not specify the target headcount after the restructuring, he noted that advancements in risk management practices will contribute to reduced employment.
Citigroup's technology investment, estimated at $3 billion in Q3, is pivotal to its transformation. Automation, streamlined processes, and enhanced risk and compliance systems are anticipated to not only drive efficiency but also lead to workforce optimization.
Fraser anticipates that the full impact of these changes will be evident by late 2024, as the firm anticipates "bending the expense curve." She emphasizes that while cost-cutting is a factor, the ultimate aim is to create a simplified, agile organization that prioritizes client service and delivers enhanced value for shareholders.
Despite facing challenges, Citigroup remains committed to its ambitious goals. With Fraser at the helm, the company is poised to embark on a new trajectory, one that aims for sustained growth, operational excellence, and enhanced shareholder value. The market eagerly awaits the unveiling of further details in the upcoming fourth-quarter results call, a testament to Citigroup's resolute commitment to its transformation journey.