Citigroup, the holding company of America's third-largest bank by assets, is reportedly considering a significant reduction in its workforce. According to sources familiar with the matter, the banking giant may let go of at least 10% of its 240,000 employees, potentially making it one of the largest rounds of layoffs on Wall Street in recent years.
Despite this news, Citigroup's stock (ticker: C) experienced a 0.6% decline in Monday's trading.
While Citigroup has not officially confirmed CNBC's report, the company did acknowledge that it would share more details during its fourth-quarter earnings report scheduled for January.
In a statement, the bank expressed the challenging nature of the decisions involved in restructuring but emphasized that they are necessary to align its structure with its strategic goals and deliver on the plan discussed during its 2022 Investor Day.
Citigroup CEO Jane Fraser had previously indicated the possibility of layoffs in September through an internal memo as part of her effort to address the bank's mounting expenses, referred to internally as "Project Bora Bora," as reported by CNBC. It should be noted that the numbers regarding staff reduction could still change in the weeks to come.
Citigroup's Challenges and Future Plans
Since Jane Fraser took over as CEO of Citigroup in early 2021, the company has faced significant challenges. The bank's expenses and head count have been on the rise in recent years. However, the growth has not translated into improved performance, as Citigroup's stock has experienced a 40% slump under Fraser's leadership.
Citigroup currently has the second-largest workforce among American banks, with 29% fewer employees than JPMorgan Chase. Despite this, JPMorgan has 65% more assets than Citigroup. In terms of efficiency, Citigroup lags behind its competitors. Its efficiency ratio, which measures noninterest expenses relative to revenue, stands at around 68%. In comparison, Bank of America and Wells Fargo have a ratio of 62%, while JPMorgan leads with a much lower ratio of 53%.
Unsurprisingly, investors have taken note of Citigroup's underperformance. The bank's stock is trading at a price-to-book ratio of 43%, which is significantly lower than JPMorgan's ratio. In fact, Citigroup's valuation is less than half the average of its peer group.
To address these challenges, Jane Fraser has outlined a plan to improve Citigroup's returns by focusing on revenue growth and cost reduction. As part of this plan, job cuts are expected, which may impact various roles such as regional managers and co-heads. The aim is to eliminate overlapping responsibilities, such as those held by chiefs of staff and chief administrative officers.
In summary, Citigroup is facing significant obstacles but remains committed to improving its performance under Jane Fraser's leadership. With a focus on revenue growth and cost reduction, the bank aims to enhance its efficiency and deliver better returns for investors.
