Citi's CEO, Jane Fraser, lays bare how the bank is running

Citi's CEO, Jane Fraser, lays bare how the bank is running

With the help of its CEO, Jane Fraser, Citigroup has instituted sweeping changes to the bank to flatten hierarchies, speed up decision-making, and increase accountability in a bid to reinvigorate the stock.

'It's going to be saying goodbye to some very talented and hardworking colleagues,' she said in a memo to CNBC staff.

Citi's vision of capitalizing on its global reach to become the leading financing partner for corporations with worldwide investment and trading needs may play to its strengths, but it's been a disappointment for investors.

It remains the only one of the four big-cap U.S. banking stocks to trade materially below its pre-pandemic price, with the share price falling more than a third during her brief tenure.

In an interview, Fraser wrote to colleagues, calling the move the'most consequential' change to the way Citi is run in nearly 20 years.

She became CEO in March 2021, and her first course of action the following month included exiting 13 retail banking markets. Citi unveiled its strategy to profit from global trade flows while bulking up in wealth management, a lucrative, fee-driven business with low regulatory burdens, on her one-year anniversary.

On the other hand, JPMorgan, Bank of America, and Wells Fargo have carved up a significant portion of the U.S. retail market that has been a cheap and sticky source of financing. The trio have two times the domestic customer deposits of Citi, and JPMorgan posted a record second-quarter profits thanks to its acquisition of California regional lender First Republic in May.

Veteran bank analyst Mike Mayo, a managing director at Wells Fargo, said Citi has gotten some important calls right of late, with the lowest exposure to commercial real estate and a higher-quality loan book that allowed it to skirt warnings by credit rating agencies in August.

Organizational changes often appear to be within baseball, with Citi, for example, replacing two main divisions with five business lines. They are frequently a public signal that something has gone wrong--not necessarily with a company's strategy, but rather in the execution of that strategy.

In order to achieve the mission, resources must be prioritized differently, as a military commander shifts forces on the battlefield. The restructuring also means every restructuring has its own winners and losers, with lines of reporting changing, products scrapped, and offices closed.

With the addition of five new direct reports, her new executive management team has now grown to 19 members. The value of Citi's balance sheet is two more than JPMorgan, a bank with a market cap five times its size.