Citigroup CEO Fraser Fights to Sell Turnaround Plan to Investors | Investment news

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NEW YORK (Reuters) – Citigroup Inc chief executive Jane Fraser must struggle to convince skeptical analysts and investors that she can overturn the bank despite overseeing a sweeping overhaul in less than a year at the helm.

Fraser took over the leadership of the Wall Street bank in February 2021, tasked with transforming a company whose share price had fallen behind rivals such as JPMorgan Chase & Co and Bank of America during the eight years at the helm of his. predecessor Michael Corbat.

Since his appointment, he has sought to simplify the company, overseeing its biggest renovation since the 2007-2009 financial crisis. The bank announced plans to leave non-core businesses, including consumer franchises in 13 markets in Asia, Europe, the Middle East and Africa last April.

On Tuesday, he doubled down, saying he intended to sell or spin off his Mexican consumer business, which Fraser had managed as the bank’s head of operations in Latin America, before becoming CEO.

The bank went further on Thursday, announcing the sale of its consumer businesses in Indonesia, Malaysia, Thailand and Vietnam.

The decision to sell the Mexican business, which Fraser previously claimed was the scale to be successful that the bank’s Asian consumer franchisees lacked, is arguably his boldest move in remodeling the bank.

Citi CFO Mark Mason said Friday that the decision to exit that business was driven by the bank’s strategy to focus on its institutional business. Although the consumer business in Mexico has produced good returns, it would be more valuable to another owner, Mason said.

However, Citigroup’s share price continues to lag behind rivals, suggesting that investors have yet to be convinced that Fraser’s turnaround plans will soon pay off.

“It’s a show-me situation,” said Odeon Capital analyst Dick Bove. “This company has been mislabeled, poorly managed and poorly managed by administration after administration for 25 years,” he said.

Since Fraser took office last February, his stock has gained 3% against JPMorgan shares up 14%, Bank of America shares up 40% and Wells Fargo up 55%.

Shares came under further pressure on Friday, down 2.5% after Citi released earnings showing a 26% drop in fourth-quarter earnings due to higher spending and weakness in its unit. consumer bank.

Fraser was questioned by analysts during a Citi conference call about the bank’s direction, replying that it aimed to become “the bank of choice for institutions with cross-border needs” and was focused on improving shareholder value.

To be sure, Fraser has less than a year in his mission to turn the bank’s fortunes upside down, and investors supporting his strategy point out that it will take some time for the changes to improve the bank’s performance.

However, it must convince analysts and investors who have been disappointed with years of previous efforts to restructure the company. Prior to handing over the reins to Fraser, Corbat had also abandoned dozens of non-core businesses.

The business had expanded under the leadership of Sandy Weill, who led the bank between 1998 and 2003. Weill led the bank through an acquisition spree before its collapse and the subsequent $ 50 billion government bailout. .

Bove cited the failed strategies of six previous CEOs before stating that Fraser’s plans alone are not enough to attract investors.

The bank routinely lags behind the financial performance of its peers and has been under increased oversight by regulators for many years since its bailout during the financial crisis.

When Citigroup changed its leadership for the last time in 2012, its shares rose and remained high for months after installing Corbat in place of Vikram Pandit.

Corbat agreed in September 2020 to relinquish the position of Fraser at the end of February 2021. At the time, the bank faced new questions about its financial controls, including the fact that it would face an erroneous payment of nearly $ 1 billion to holders. of bonds for which he was the trustee.

Fraser’s strategy is designed to simplify the company, improve its focus on its institutional activities and make better use of its capital.

“The new Citi is a simpler company that focuses more as a global provider of banking, payments and investment services to multinational corporations and institutions, growing companies and affluent individuals,” Wells Fargo analyst Mike Mayo, who has a ‘overweight’ rating on the stock, it said in a research note.

However, the plan has not yet upped the stock.

Bove, who praises Fraser’s moves so far and recommends the shares, blames the poor performance of the shares on “investor exhaustion.”

(Reporting by David Henry in New York; Editing by Matt Scuffham and Nick Zieminski)

Copyright 2022 Thomson Reuters.

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