Citigroup's historic $1 billion reorganisation aims for efficiency and profitability

Citigroup’s CFO has revealed that the business’ largest reorganisation in decades will cost approximately $1 billion.

The overhaul, which is expected to be completed in the first quarter, is part of the bank’s strategy to simplify its structure and align its management with its business strategy.

Mark Mason announced the cost of the reorganisation during a recent announcement. He stated that the charges related to restructuring and severance would amount to about $1 billion.

Mason emphasised that the reorganisation is part of a broader strategy to transform Citigroup once and for all. The bank aims to boost profitability, increase its stock price, and better position itself in the market.

The overhaul for profitability

The reorganisation involves a significant reduction in management layers, from 13 to eight, as part of the bank’s most extensive overhaul in decades.

CEO Jane Fraser aims to reduce bureaucracy, increase profits, and boost the company’s stock, which currently lags behind its peers.

“We need to change how we run Citi in order to truly transform it once and for all,” Fraser stated during a third-quarter earnings call in October.

The restructuring will also see the leaders of Citigroup’s five interconnected businesses report directly to the CEO, eliminating unnecessary complexity across the bank and increasing accountability.  Fraser believes that a more streamlined and accountable structure will enable Citigroup to adapt quickly to market changes.

Fraser has also emphasised the need to transform Citigroup and improve its stock performance. The bank’s stock has lagged behind its peers, and Fraser believes that a more agile and streamlined organisation will help boost shareholder value.

Where is the cost coming from?

The $1 billion cost associated with the reorganisation includes charges related to restructuring and severance. Mason expects some of these charges, approximately $200 million, to be booked in the fourth quarter.

The bank says it is committed to retaining top talent and supporting employees who are leaving the company during this transition. The restructuring process is expected to be fully completed by the end of the first quarter of next year.

External factors, such as the Argentina elections, are also expected to impact Citigroup’s revenue. Mason estimated that these factors could put pressure on revenue to the tune of a couple of hundred million dollars.

Citigroup’s future

The reorganisation is expected to revive Citigroup’s share price, which has lagged behind its peers, and give the CEO more direct control over its businesses.

The bank’s third quarter earnings report showed promising results, with profits beating estimates due to rising trading revenue, investment banking fees, and interest payments.

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