Citi Cuts Executives and Launches Major Restructuring... Stock Rises 1.6%

U.S. Citigroup is embarking on its largest restructuring in about 20 years. While splitting its business structure into five divisions, each division head will report directly to CEO Jane Fraser, simplifying the executive decision-making structure. Although specific numbers have not been disclosed, workforce reductions are also planned in the future.

[Image source=Reuters Yonhap News]

On the 13th (local time), Citigroup announced this restructuring plan. Instead of maintaining the existing two major business division heads, the company will appoint heads for five divisions?Services, Markets, Banking, Consumer Finance, and Asset Management?each reporting directly to the CEO. This aligns the management structure with business strategy and simplifies the management system. The goal is to accelerate decision-making speed and expedite the execution of Citigroup’s top priority, "Transformation."

In her third year as CEO, Fraser stated, "This change will remove unnecessary complexity across the bank, strengthen accountability for delivering excellent customer service, and expand synergies through natural connections between businesses." She explained, "The heads of the five business divisions, who are fully involved in the company’s operations and daily critical decisions, need to be at the same table as I am," adding, "A clearer and more direct decision-making structure is necessary."

Accordingly, the company has begun the process of finding a head for the Banking division among the five business units. The current heads of the other four divisions will continue to lead. The regional heads overseeing operations in about 160 countries worldwide have also been consolidated and reorganized into two regions: U.S. and non-U.S.

The restructuring includes workforce reductions. In a memo to employees, CEO Fraser mentioned the layoffs, saying, "We will say goodbye to talented and hardworking colleagues who have made important contributions to our company." However, no specific numbers were disclosed that day. Fraser explained that the restructuring plan will be finalized by the end of November, at which time employees will learn about any changes to their roles. The restructuring process is expected to be completed by the first quarter of next year. Major foreign media outlets such as Bloomberg and The Wall Street Journal (WSJ) cited anonymous sources reporting that the company has not yet decided on the scale of the layoffs.

The market has welcomed Citigroup’s restructuring news. Local media pointed out that the previous dual leadership structure at Citigroup tended to lead to tensions among executives and weakened accountability, emphasizing the need for reorganization. Since Fraser’s appointment as CEO, Citigroup’s stock price has fallen about 40%. Last week, Mayo issued an investor memo titled "What is Happening to Citigroup Stock," noting that Citigroup has the lowest valuation among major U.S. banks. The then stock price of around $41 per share was described as a level only seen during the 2007 global financial crisis.

On the day of the announcement, Citigroup’s stock closed at $42.37 per share on the New York Stock Exchange, up 1.66% from the previous session, following the restructuring plan announcement.

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