Citi has quietly undergone a massive restructuring over the past year. Here are the businesses it overhauled and the executives who departed.
- Citigroup declared in 2017 its post-financial crisis restructuring was complete, but over the past 18 months the bank has quietly, slowly undergone another significant overhaul.
- A little over two years after its investor day, the firm and leadership surrounding CEO Mike Corbat looks vastly different. Just five of the 14 executive officers on Corbat's team remain.
- In a recent meeting with bank analysts, Citi executives signaled that the slow-burn restructuring may be nearing completion.
- Here's a recap of businesses Citi overhauled and the executives who've departed over the past 18 months.
- Click here for more BI Prime stories.
Back in the summer of 2017, at Citigroup's first investor day in roughly a decade, CEO Michael Corbat declared the company's mammoth post-financial crisis "restructuring is over."
A little over two years later, just five of Citi's 14 executive officers remain. The only speaker from that day who remains in Corbat's employ is Stephen Bird, the head of global consumer banking.
The announcement of another wide-scale retooling in 2018, just a year after the investor day, would've raised eyebrows and made for significant messaging detour. But for more than a year now, Citigroup has been quietly undergoing a substantial restructuring, and the firm and leadership surrounding Corbat today looks vastly different.
Divisional reorgs and senior executive departures have dribbled out every couple months or so dating back to last summer, when the bank announced it was overhauling its consumer banking franchise. Weeks later, Citi merged its investment bank with its capital markets business.
The changes have continued to roll out in 2019, including the surprise exit of company president Jamie Forese, 56, who was widely seen as a potential heir to Corbat. Paco Ybarra was appointed in his stead, and several more structural reorganizations have taken place since.
Individually, each change is notable, but not earth shaking. But the totality of the changes adds up to significant and sweeping overhaul. Had they been announced at once, it would've represented a seismic event for the firm.
While the changes started unfolding in earnest after activist ValueAct Capital unveiled its stake in the company in May 2018, Citigroup has downplayed the notion that activist pressure has been the catalyst, despite much speculation. Citigroup, which has taken hits for returns that have lagged behind its big-bank peers, has been digging deep to jump-start revenue growth and deliver for investors, some of which have been getting antsy for a jolt to the bank's stubborn stock price.
But 2019 has been a different story thus far. Citi's 35% total return year-to-date is best among the global banks and nearly double the KBW Bank Index - a sign that Corbat's strategy may be paying off.
Recently, executives signaled that the slow-burn restructuring may be nearing completion. In a recent meeting with bank analysts at Keefe, Bruyette, and Woods, Chief Financial Officer Mark Mason said there haven't been any meaningful internal conversations about further restructuring.
"Management believes that the majority of restructuring has taken place at this point in time," KBW wrote in a research note in September.
Instead, Mason and the leadership team are concentrating on expanding their lead in business lines where they're already winning - such as Treasury and Trade Solutions and securities services.
Of course, this doesn't mean job cuts are off the table altogether if Citi encounters headwinds on the way to hitting its return targets.
Here are all of the most significant changes Citi has undergone over the past 18 months:
- May 2018: Activist investor ValueAct reveals that it has amassed a $1.2 billion stake in Citigroup.
- August 2018: In the first major shakeup and sign of things to come, Citi restructured its Global Consumer Bank, modeling its US division off of its successful regional efforts in Asia and Latin America. Global cards chief Jud Linville left the company, and Anand Selva was elevated to head of US consumer banking.
- September 2018: Three more senior executive departures are announced, including longtime CFO John Gerspach, who navigated the firm's post-financial crisis turnaround. Joining Gerspach were Jim Cowles, CEO of the bank's operations in Europe, the Middle East, and Africa, and Bill Mills, CEO of North American operations, who worked at Citi for 39 years and 36 years, respectively.
- September 2018: Several days later, Business Insider broke the news that Citi was overhauling its investment bank, combining it with its capital markets business in a setup that more closely mirrors Wall Street rivals. In an internal memo, the bank announced Tyler Dickson and Manolo Falco as coheads of the new-look Banking, Capital Markets, and Advisory unit, while former corporate and investment banking chief Ray McGuire took on a new role as vice chairman of Citigroup.
- December 2018: Staring down losses of as much as $180 million from foreign-exchange trades gone awry, Citi removed its FX prime brokerage unit from the currency-trading division and put it instead under its prime finance and securities services division. Sanjay Madgavkar, the head of the afflicted unit and a two-decade veteran, left the firm and was replaced by Chris Perkins.
- January 2019: Chairman Michael O'Neill stepped down upon reaching the mandatory retirement age and was replaced by John Dugan, a Covington & Burling partner, Comptroller of the Currency from 2005 to 2010, and former board member of the Federal Deposit Insurance Corporation.
- April 2019: In shock move to many, Institutional Clients Group chief Jamie Forese, a 34-year company veteran, announced his retirement. He was succeeded by Paco Ybarra, the head of markets, who was in turn replaced by Carey Lathrop and Andrew Morton. The departure of Francisco Aristeguieta, CEO of Asia Pacific and member of the operating committee, was announced the same day.
- June 2019: Ybarra, Lathrop, and Morton didn't sit idle for long. The leaders announced in an internal memo the merger of the firm's rates and currencies operations, two of the top moneymakers in Citi's $11.6 billion FICC division.
- July 2019: The following month, the banked overhauled its stock-trading operation. In an internal memo from Lathrop and Morton, Citi announced the merger of its equities division with its prime, futures, and securities services division. The new group, called Equities and Securities Services, is being headed up by three executives: Dan Keegan, Okan Pekin, and Murray Roos.
- July 2019: Separately, Citi began slashing hundreds of jobs across sales and trading, including 10% of the equities division, amid broader industry woes.
- August 2019: The bank wound down a little-known principal-investing team called Citi Credit Opportunities. The group, a vestige of pre-financial-crisis banking, had $1 billion to make loans to small and midsize companies and was outgunned amid the rise of private-lending firms.
What happens next for Citigroup?
At a financial conference in September, Mason reaffirmed the bank's commitment to hitting its 12% target for return on tangible common equity (ROTCE), and said expense reductions are on the table - especially in "transactional expenses and incentive compensation" - if revenues head south.
But he also flagged three crucial business lines the firm won't compromise on: Treasury and Trade Solutions, securities services, and branded cards.
"We're going to be very thoughtful about protecting investments that need to be protected," Mason said. "And otherwise, everything else is on the table."