Citigroup CEO faces struggle to convince investors

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Citigroup CEO faces struggle to convince investors

NEW YORK Reuters - Chief Executive Jane Fraser is facing a struggle to convince skeptical analysts and investors that she can turn the bank around despite a radical overhaul in less than a year at the helm.

In February 2021, Fraser took over thehelm of Wall Street Bank and was charged with transforming a business whose share price had lagged rivals like JPMorgan Chase Co and Bank of America during her predecessor Michael Corbat's eight years at thehelm.

She has been overseeing the firm's biggest overhaul since the financial crisis in 2007 -- 09 since her appointment. The bank plans to exit non-core businesses, including consumer franchises in 13 markets in Asia, Europe, the Middle East, and Africa last April.

On Tuesday, it doubled down, saying it planned to sell or spin-off its Mexican consumer business, which Fraser had run as head of the bank's Latin American businesses before becoming CEO.

The bank announced the sale of its consumer businesses in Indonesia, Malaysia, Thailand and Vietnam on Thursday.

Fraser's decision to sell the Mexican business that had previously said had the scale to succeed which the bank's Asian consumer franchises lacked, is arguably her boldest move yet in reshaping the bank.

On Friday, Mark Mason, Citi's CFO, said that the decision to leave the business was driven by the bank's strategy to focus on its institutional business. The consumer business in Mexico had good returns, but it would be more valuable to another owner, Mason said.

Citigroup's share price continues to lag rivals, suggesting investors are not convinced that Fraser's turnaround plans will bear fruit anytime soon.

Dick Bove, an analyst at Odeon Capital, said it was a show-me situation. This company has been mismanaged, mismanaged, and poorly handled by one administration for 25 years, he said.

Since Fraser took over her post in February, its shares have gone up 3% compared to JPMorgan's 14%, Bank of America's shares have climbed 40% and Wells Fargo is 55%.

The shares fell 2.5% on Friday after Citi released earnings showing a 26% slump in fourth quarter profit, as it took a hit from higher expenses and weakness at its consumer banking unit.

Fraser was questioned by analysts on Citi's conference call on the direction of the bank, answering that she wanted to be the preeminent bank for institutions with cross-border needs and was focused on improving shareholder value.

Fraser is less than a year into her mission to turn the bank's fortunes around and the investors who support her strategy stress that it will take time for the changes to improve the bank's performance.

She must convince analysts and investors that they have been scarred by years of disappointment with previous attempts to restructure the business. Corbat had exited dozens of non-core businesses before he handed over the reins to Fraser.

The business had grown under the leadership of Sandy Weill, who ran the bank from 1998 to 2003. Weill led the bank through an acquisition spree before its collapse and subsequent $50 billion government bailout.

Bove cited the failed strategies of six previous CEOs before saying that Fraser's plans are not enough to attract investors.

Since its bailout in the financial crisis, the bank has been under enhanced supervision from regulators for many years and has lags the financial performance of peers.

When Citigroup took over its leadership in 2012, its shares surged and remained elevated for months after Corbat was installed in place of Vikram Pandit.

Corbat agreed in September 2020 to give up the post to Fraser at the end of February 2021. At the time, the bank faced new questions about its financial controls, including that it should have caught a erroneous payment of nearly $1 billion to holders of bonds for which it was trustee.

Fraser's strategy is designed to simplify the company, improve its focus on its institutional businesses and put its capital to better uses.

Wells Fargo analyst Mike Mayo, who has an overweight rating on the stock, said that Citi is a simpler firm that has greater focus as a global banking, payments and investing provider to multinational firms and institutions, growing corporates and affluent individuals.

The stock was not lifted yet by the plan.

Bove, who applauds Fraser's moves so far and recommends the shares, blames the poor share performance on investor exhaustion.