Citigroup announces closure of distressed-debt desk as part of bank’s ongoing overhaul

Citigroup, one of the major Wall Street banks, has announced the closure of its distressed-debt desk as part of CEO Jane Fraser’s ongoing overhaul of the financial institution. This move comes after the recent announcement that Citigroup will be shutting down its municipal-bond group by the end of March. The distressed-debt desk currently employs around 40 people, and its closure is expected to impact approximately 20 positions. This decision is part of Citigroup’s broader organizational restructuring, known as “Project Bora Bora,” which aims to cut costs, simplify management, and improve financial performance. The bank’s stock price, which has seen a year-to-date increase of 10.7%, saw a slight uptick in after-hours trading following this news.

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Background

Citigroup, one of the major Wall Street banks, is currently undergoing a significant overhaul led by CEO Jane Fraser. This restructuring plan, known internally as “Project Bora Bora,” aims to cut costs, eliminate management layers, and improve the bank’s financial performance. As part of this ongoing overhaul, Citigroup has made several notable announcements and decisions regarding its operations and business units. These actions have raised questions about the impact on employees, investor confidence, and the bank’s stock performance.

Citigroup’s Ongoing Overhaul

CEO Jane Fraser’s Restructuring Plan

CEO Jane Fraser has been leading Citigroup’s restructuring efforts since assuming the role in February 2021. She aims to streamline the bank’s operations, enhance its efficiency, and improve its profitability. Fraser’s plan involves cost-cutting measures, elimination of management layers, and a focus on key business areas that can drive growth.

Project Bora Bora

Under Fraser’s leadership, Citigroup launched “Project Bora Bora,” an internal initiative aimed at transforming the bank’s operations and organizational structure. The project seeks to identify areas for improvement, streamline processes, and drive innovation within the bank. It is a key component of Citigroup’s ongoing overhaul and is expected to have a significant impact on the bank’s operations and employees.

Financial Performance

Citigroup has faced challenges in recent years, with missed targets and returns that have lagged behind its Wall Street peers. Fraser’s restructuring plan is designed to address these issues and improve the bank’s financial performance. By cutting costs, streamlining operations, and focusing on key business areas, Citigroup aims to enhance its profitability and regain investor confidence.

Closure of Distressed-Debt Desk

Latest Part of Restructuring

As part of its ongoing overhaul, Citigroup has announced the closure of its distressed-debt desk. This decision is in line with CEO Jane Fraser’s restructuring plan and aims to reallocate resources to more profitable areas of the bank. The distressed-debt desk currently employs approximately 40 people at Citigroup.

Reported Impact on Jobs

The closure of the distressed-debt desk is expected to have an impact on approximately 20 positions at Citigroup. This move is part of the broader organizational restructuring efforts undertaken by the bank to improve efficiency and cut costs. While the exact details of the job cuts are yet to be disclosed, it is clear that Citigroup is prioritizing profitability and reallocating resources to key business areas.

No Comment from Citi

Citigroup has declined to comment on the reports regarding the closure of its distressed-debt desk. The bank is likely awaiting the completion of its internal processes and discussions with employees before making any official statements. This silence has left employees and industry analysts speculating about the bank’s future plans and the potential impact on its workforce.

Citigroup’s Municipal-Bond Group

Previous Announcement to Shutter

In addition to the closure of its distressed-debt desk, Citigroup recently announced the shuttering of its municipal-bond group. This decision is part of CEO Jane Fraser’s efforts to reallocate resources and streamline operations within the bank. The municipal-bond group is responsible for managing Citigroup’s activities related to municipal bonds, which are debt securities issued by state and local governments.

End Date in March

Citigroup has set a deadline of the end of March for the closure of its municipal-bond group. This gives the bank and its employees a few months to transition and adjust to the changes. Customers and clients who have been working with the municipal-bond group will need to be informed and guided during this period to ensure a smooth transition to alternative service providers within Citigroup or elsewhere.

Organizational Restructuring

Cost-cutting Measures

As part of Citigroup’s ongoing overhaul, the bank has implemented various cost-cutting measures. These measures aim to reduce expenses and improve profitability. By identifying areas of unnecessary spending and streamlining operations, Citigroup can allocate its resources more effectively and invest in key business areas that generate the highest returns.

Elimination of Management Layers

Another significant aspect of Citigroup’s organizational restructuring is the elimination of management layers within the bank. By reducing bureaucracy and creating a more agile and efficient structure, Citigroup aims to enhance decision-making processes and facilitate faster execution of strategies. This restructuring effort aligns with the broader goal of improving the bank’s financial performance and competitiveness in the market.

Impact on Employees

Possible Job Cuts

The closure of the distressed-debt desk and the shuttering of the municipal-bond group indicate that Citigroup is making difficult decisions regarding its workforce. While the exact number of job cuts has not been disclosed, industry reports suggest that Citigroup could reduce its workforce by at least 10% across various business units. These job cuts are part of the bank’s broader efforts to improve profitability and reallocate resources to areas that offer higher growth potential.

Effect on Major Businesses

The organizational restructuring and potential job cuts at Citigroup are expected to have an impact on the bank’s major businesses. While the exact consequences are yet to be seen, it is likely that the closure of certain units and the reduction in workforce will result in changes to the bank’s operations and client services. Customers and clients may experience disruptions as Citigroup adjusts its business model and focuses on key areas.

Investor Confidence

CEO Fraser’s Efforts

CEO Jane Fraser’s leadership during Citigroup’s ongoing overhaul plays a crucial role in rebuilding investor confidence. Fraser has taken proactive steps to address the bank’s challenges, implement cost-cutting measures, and streamline operations. Her strategic decision-making and communication with investors are aimed at restoring trust and demonstrating a clear path to improved financial performance.

Missed Targets and Lagging Returns

Citigroup’s missed targets and lagging returns in recent years have eroded investor confidence. The bank has faced challenges in generating consistent profits and delivering returns comparable to its Wall Street peers. As a result, investors have become cautious and skeptical about the bank’s ability to regain its competitive edge. CEO Fraser’s restructuring efforts are aimed at addressing these concerns and improving Citigroup’s financial performance.

Stock Performance

Upward Movement in After-hours Trading

Following the announcement of the closure of the distressed-debt desk, Citigroup’s stock experienced an upward movement in after-hours trading. This positive reaction suggests that investors may view the restructuring efforts as a step in the right direction for the bank. The closure of underperforming units and the reallocation of resources to more profitable areas could lead to increased profitability and, ultimately, a higher valuation for Citigroup’s stock.

Year-to-Date Performance

Citigroup’s stock performance year-to-date has been relatively positive. Despite the challenges faced by the bank and the broader financial industry, Citigroup’s stock price has increased by 10.7%. This performance indicates that investors are cautiously optimistic about the bank’s prospects and have responded positively to CEO Fraser’s restructuring plan. However, it is important to monitor Citigroup’s ongoing financial performance and the market conditions to assess the long-term impact on the stock price.

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About the Author

Rey Mashayekhi is a News Editor for MarketWatch. As an experienced financial journalist, Mashayekhi provides insights and analysis on a wide range of topics, including market trends, investment strategies, and corporate developments. With a deep understanding of the financial industry, Mashayekhi offers valuable perspectives and expert opinions to help readers navigate the complex world of finance.

By following the ongoing overhaul of Citigroup led by CEO Jane Fraser, investors, employees, and industry stakeholders can gain a comprehensive understanding of the bank’s restructuring efforts and their impact on various aspects of the organization. The closure of the distressed-debt desk and the shuttering of the municipal-bond group are key milestones in Citigroup’s journey to enhance its profitability, streamline operations, and boost investor confidence. As Citigroup navigates through these changes, investors will closely monitor the bank’s financial performance, stock movement, and the overall implications for the industry.

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