During a recent lunch meeting with Warren Buffett, Citigroup (C.N) initiated a fresh chapter. CEO Jane Fraser presented her latest series of organizational restructuring endeavors aimed at streamlining the bank. Buffett encouraged her to continue with the initiatives.
The billionaire investor endorsed Fraser’s plans to streamline the banking giant, which includes eliminating management layers and streamlining decision-making. He did not provide additional details, but he urged her to proceed with the reorganization program. Fraser recounted the meal with the Berkshire Hathaway Inc. -owned financial institution’s largest shareholder on a conference call with managing directors on Thursday, according to a source who was on the call.
Fraser is engineering the biggest revamp in a decade to cut back pink tape and boost the Wall Street firm’s income and share worth. Analysts have praised mainly her plans. However, the company has yet to meet earnings targets, and investors remain wary of the third-largest U.S. bank by assets.
Citigroup has already begun cutting jobs and eliminating management layers as part of the reorganization initiative. The bank has also axed several businesses, including its municipal bond business, which impacted around 100 staff members. Fraser said that Citigroup will begin to eliminate more roles as part of the reorganization effort, known internally as “Project Bora Bora,” beginning this week.
She added that more responsibilities would be consolidated, and leaders in the bank’s five critical units would report directly to her. She also reiterated that the company will be “committed to retaining our talent and supporting those who choose to leave.”
The upcoming layoffs could impact senior managers and some rank-and-file employees. The sources said those who are being dismissed will be notified starting Wednesday, with new dismissals expected to be announced daily through early next week.
The sources added that some employees have already used vacation time and mental health leave to look for work elsewhere. The upcoming cuts are also expected to affect revenue and profit.
Citigroup’s fourth-quarter results reflected a loss of $1.8 billion, or $1.16 per share, which included several one-time charges. These charges encompassed a $780 million charge tied to severance expenses for employees impacted by the overhaul. Shares in the bank closed up about 3% Friday despite the disappointing earnings. The broader financial sector was lower, weighed down by concerns about the Fed’s interest rate increase forecast. Financial stocks, in general, have been underperforming peers this year. The Financial Select Sector SPDR Fund, a popular ETF for investing in the sector, is down 1.5% this year. The Vanguard Financials ETF – which holds an array of financial firms, including Bank of America and Wells Fargo & Co – is flat. The iShares Financial Services Core ETF – which tracks large financial stocks, including those in the banks mentioned above – is up 1% this year.