Citigroup’s Fraser Plans to Remove Five Management Layers in Reorganization

Citigroup Inc. Chief Executive Officer Jane Fraser plans to get rid of five layers of management as part of her sweeping reorganization of the bank.

(Bloomberg) — Citigroup Inc. Chief Executive Officer Jane Fraser plans to get rid of five layers of management as part of her sweeping reorganization of the bank. 

The company intends to cut back to eight layers from 13 as part of the restructuring, according to a presentation posted on the firm’s website Friday as the bank announced third-quarter results. Already, the adjustments made by Fraser have allowed the company to eliminate roughly 60 management committees.

The changes will ultimately amount to the Wall Street giant’s biggest restructuring in two decades. With the moves, New York-based Citigroup is abandoning its two core operating units and instead focusing on five key businesses: trading, banking, services, wealth management and US consumer offerings.

“The changes will eliminate layers, duplication and complexity, allowing us to operate the bank more agilely and freeing our people up to focus on clients and execution,” Fraser told analysts on a conference call on Friday. The reduction of management committees already “frees up over tens of thousands of people-hours annually.”

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Citigroup has said that the overhaul will lead to more job cuts, but hasn’t yet put a number on the level of eliminations. The bank plans to disclose that figure as well as the total savings it expects to reap from the changes during its fourth-quarter earnings call in January. 

Ahead of the reorganization, Citigroup has already cut about 7,000 positions so far this year, recording severance charges of about $650 million tied to the actions, Chief Financial Officer Mark Mason said on a conference call Friday. 

Even so, headcount has remained flat at 240,000 for the past four quarters as Citigroup has hired more technology staffers and other back-office workers who will help the firm satisfy a pair of consent orders that regulators slapped on the bank three years ago.

Headcount will likely fall in coming quarters as Citigroup finishes up its work to offload more than a dozen retail-bank units in overseas markets, Mason said.

‘Tough Decisions’

Fraser has told Citigroup’s top managers they have until until the end of November to explain how they plan to strip away the layers of bureaucracy that have long plagued the company. Cuts will begin in the final months of the year and continue through the end of the first quarter, the company has said. 

“We’ve made tough decisions here,” Fraser said on the conference call. “At the end of the work, we will have a simpler firm that can operate faster, better serve our clients and unlock value for our shareholders.”

Analysts pressed Fraser on Friday for more details about the reorganization, with Wells Fargo & Co.’s Mike Mayo asking how the company would ensure the work would actually result in a simpler Citigroup. 

Fraser offered the example of the firm’s human-resources division as one area that might see cuts. 

“We had HR in a region: You had the region head, you had the institutional client group head, you had the banking head,” Fraser said. “In addition, you had a North Asia head and a South Asia head. We’re just going to have the North Asia head and the South Asia head, and all of those roles collapse into those two.”

Ditching Reports

The international consumer divestitures also will allow the firm to eliminate roles that were specifically catering to those units, she said. And the firm is doing away with as many co-heads as possible to ensure there are “single points of accountability,” she said. 

The company also has identified 1,000 internal profit-and-loss reports that it will no longer need to compile as a result of the planned changes, Fraser said. That would amount to 50% of the financial-management reports assembled within the bank, she said. 

“These strategy teams, marketing teams, many of the little cottage industries that build up over time, we can speed up decision-making with fewer committee layers,” Fraser said. “Shadow P&Ls by country, quarterly outlooks, monthly performance updates, all the associated tracking and reconciliations over there that are effectively for a shadow P&L rather than the one that matters to our shareholders.”

(Updates with details from conference call starting in fourth paragraph.)

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