Citigroup’s ruthless remake

**Saffeya Ahmed** (0:04)
Good morning from the Financial Times. Today is Monday, July 13th, and this is your FT News Briefing.
It's earnings week on Wall Street, and Citigroup is one of the big earners after years of change. Plus, there's some drama at the World Economic Forum.

**Ortenza Aliaye** (0:19)
So at the moment, there's a little bit of a vacuum in power within the WEF. They need a permanent chair, and they also need to find a chief executive.

**Saffeya Ahmed** (0:29)
I'm Saffeya Ahmed and here's the news you need to start your day.
Wall Street banks are reporting quarterly earnings this week, and they're likely to have some good news to share, at least when it comes to investment banking. The five largest American investment banks are set to announce their biggest haul in investment banking fees in almost five years. That's JP Morgan Chase, Goldman Sachs, Morgan Stanley, Bank of America and Citigroup. A Bloomberg estimate puts their projected total at $11.1 billion. That's up by almost a third from this time last year. The banks have SpaceX's blockbuster listing to thank for this windfall, plus a resurgence in mega mergers.
Now, let's zoom in on one of those banks specifically, Citigroup. It's expected to report another solid quarter for earnings tomorrow. It hit a key profitability metric earlier this year too, and that prompted its CEO, Jane Fraser, to set even more aggressive targets back in May. This is the first earnings report since she set those. Now, things haven't always looked so rosy for Citigroup. Fraser has done a reset of the banks since she took over in 2021, but some of the moves she's taken have been controversial internally. I'm joined now by the FT's Akila Kinio. She covers US banking. Hey, Akila.

**Akila Kinio** (1:58)
Hi.

**Saffeya Ahmed** (1:59)
So give me a sense of where Citigroup's financials are going into this earnings report.

**Akila Kinio** (2:03)
So Citigroup is going into this on the back of a very strong share price performance. There's really been a sort of turnaround in the stock, and the bank was the highest performing last year. And I think now it's all about trying to prove to the market that they're still more upside, because it still lags behind peers in terms of scale profitability and share price. And the bank is also crucially still under two consent orders from banking regulators that have to do with this big erroneous payment they sent to Revlon creditors back in 2020
And that's still weighing on its reputation and on the stock potentially.

**Saffeya Ahmed** (2:44)
Right, now the consent orders you're talking about come from when Citi accidentally wired almost $900 million to creditors of the cosmetics group Revlon, instead of a $7.8 million interest payment that it meant to send. But let's go back to Fraser. As I understand it, she's done quite a bit of restructuring at the bank.
Tell me what exactly she did and what impact it had.

**Akila Kinio** (3:08)
Yeah, so she's done what people consider to be the most ambitious, the most amount of change in at least a decade for the bank. So at first, she decided that she would change the business model of the bank. So this kind of super global bank that had a retail presence in several markets, she decided to pair that back, exit 14 markets and just focus on where, as she says, the bank has the right to win. So making it a more simple business and more profitable business. She also changed the structure at the top. So she got rid of an entire management layer to prevent silos in the bank. And she really was forced to do that because of regulatory pressures.
And then finally, she then took a big swing and gamble and decided to cut 20,000 jobs over three years at the bank to simplify its operations and again boost profitability.

**Saffeya Ahmed** (4:07)
Are there any other big moves that Fraser has made as part of her overhaul?

**Akila Kinio** (4:11)
So she's made two big hires. To run the wealth business, which was underperforming, she poached Andy Sieg from Bank of America, where he was running Merrill Lynch. Since he joined, there have been complaints to Citigroup's board about his management style and his leadership. There was also a lawsuit against him, alleging sexual harassment to him, which the bank says has no merit. On the banking side, on the investment banking side, Citigroup hired Viz Ragavan from JP Morgan.
With him, we're not aware of any complaints, but we wrote this big piece in the FT showing that when the bank had hired him, he actually was on his way out from JP Morgan, in part because of bullying allegations. And so, yeah, both of these hires have made waves. And Jane Fraser and the bank have really stood by them and argued that the kind of discontent is needed because of the financial improvements they're making.