Fraser Rises to Citi CEO Surrounded by Challenges and Deadlines
Jane Fraser faces a slew of challenges as she becomes chief executive officer of the third-largest U.S. bank.
(Bloomberg) -- Jane Fraser’s early career advising financial firms on tough problems is about to come in handy atop Citigroup Inc.
Fraser faces a slew of challenges -- and several looming deadlines -- as she becomes chief executive officer of the third-largest U.S. bank on Monday. Her to-do list includes overhauling controls to satisfy regulators, reshaping operations around the globe, meeting environmental and workforce-diversity goals and guiding the firm out of a pandemic that’s forced many of its employees home and eroded revenue.
In one sign of what’s ahead, her executive team is likely to tell the Office of the Comptroller of the Currency the company needs to hire thousands of coders and compliance officers to see through mandated improvements, according to a person familiar with the plan. Behind the scenes, the recruiting spree already has begun, pushing up costs this quarter.
“The biggest thing on her plate is going to be the consent orders” issued by the OCC and Federal Reserve last year, said David Konrad, an analyst at D.A. Davidson. “The overall investment in the franchise in terms of technology is probably the thing she has the biggest sense of urgency for.”
Fraser, 53, was a partner at McKinsey & Co. focusing on financial services and strategy before joining the lender in 2006. Her ascent to CEO is both a milestone for an industry dominated by men and a formality. Ever since the board announced in September that she would succeed Michael Corbat this month, she’s been gearing up, overseeing sweeping reviews of business lines, systems and personnel policies -- sometimes steeping herself in details.
Fraser already has handed her fellow board members a report showing how millions of pieces of data zip through Citigroup’s systems and laying out steps to fix deficiencies. The plan also was sent to the OCC’s lead examiner for the bank, Greg Sullivan, who now expects quarterly updates until the consent order is resolved.
An even more detailed document, the bank’s so-called comprehensive action plan covering tech and risk management, is due to the OCC in May.
Meanwhile, the Federal Reserve has its own demands. Citigroup has identified gaps in programs for managing liquidity and compliance, and it must next submit a plan to address them.
Through all of this, the New York-based bank is adopting a more hands-on approach to diagnosing and treating its ails.
“We often used outside consultants instead of doing this work ourselves,” Chief Administrative Officer Karen Peetz told a conference in November. “But we are committed for this go-around and for the future that these will be Citi employees who will be working on this.”
The firm predicts tech spending will contribute to an increase in total costs of as much as 3% this year, hindering efforts to improve returns. For her part, Fraser is looking for ways to simplify the company.
Honing Strategy
The new CEO has embarked in recent months on what she calls a “dispassionate” look at the bank. She’s been adamant that Citigroup’s strategy doesn’t need a massive overhaul. Instead, she’s making and unveiling decisions as she goes.
That may include reorganizing certain businesses and cutting others that don’t fit. The firm is weighing, for example, whether to exit consumer units in Asia, including those in South Korea, Thailand, the Philippines and Australia. It would keep operations serving companies there.
“Like any true Scot, I believe there is value to unlock by simplifying the firm,” Fraser, who was born in the seaside town of St. Andrews in Scotland, said on an earnings call in January.
That month, the bank combined its private banking and wealth management offerings under Citigroup veteran Jim O’Donnell. The unit serves people with $200,000 and much more -- counting a quarter of the world’s billionaires as clients. The business is large enough that the bank is mulling whether to break out the new unit’s results during earnings reports and conference calls.
“When you think about the profitability and the returns of a business like this and the multiples that come with that, we want to be as transparent as we can so we get the appropriate valuation associated with what we think is a great opportunity,” Chief Financial Officer Mark Mason said at a conference last week.
Environment and Diversity
Citigroup also faces a few deadlines of its own making. Fraser will have to figure out how to meet certain environmental and sustainability commitments. The firm has vowed to measure and disclose emissions tied to its massive lending portfolio and is working to finance $250 billion of sustainable activities by 2025.
In 2018, the firm set targets for diversifying its executive ranks from assistant vice president up through managing director. The plan called for women to hold at least 40% of those posts around the world by the end of this year, and for Black employees to account for at least 8% in the U.S.
To that end, Citigroup requires managers making hires to interview multiple diverse candidates for open positions. And it trained thousands of those managers to recognize biases in their decisions.
As the first woman to run a U.S. banking giant, Fraser is a beacon to female employees across the industry. But her ascent comes as hundreds of thousands of women leave U.S. workplaces, taking over care-giving burdens amid the pandemic. In January, the participation rate of women in the workforce touched its lowest point in 30 years.
“It’s important that people who are not the conventional CEO types -- who aren’t white men -- get the opportunity to see themselves in leadership,” said Courteney Keatinge, senior director of environmental, social and governance research at the governance firm Glass Lewis. “That opens up a lot of doors.”
Pandemic Planning
Fraser has led the firm’s response to the pandemic since early last year, helping decide when to send workers home to stem the spread of the disease. Now, she’s studying where the bank can be more flexible, potentially letting some people keep working from home in the future.
Still, Citigroup has made clear that it hopes to see most workers back in the office one day. Plastic barriers adorn desks at its headquarters in New York’s swanky Tribeca neighborhood, and signs throughout the building remind employees to wear masks and maintain social distancing.
“From a cultural point of view -- apprenticeship, the sense of belonging -- you are better together,” she said in an interview in November. “But we’ve certainly learned that you can have a lot of collaboration on Zoom calls and the like.”
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