Citigroup CEO faces growth challenge after revamp

Despite share price boost, Fraser needs to address lacklustre earnings and staff morale

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Citigroup investors have rewarded chief executive Jane Fraser with a share price boost after she announced a sweeping overhaul of Citi's sprawling structure in September, cutting costs by laying off 5,000 employees. Next, they want to see growth in wealth management investment banking.

and Wall Street investors welcomed Ms Fraser's overhaul, but warned that the CEO has major challenges ahead to boost returns and catch up with rivals, including regulatory problems, lacklustre earnings and an unsettled workforce.

"If this was a chess game, I would say the opening phase is over, and now the middle phase begins," said Mr Peter Nerby, an analyst at ratings agency Moody's.

Citi's stock is so depressed that it is hard to lose money betting on it, said Mr Daniel Babkes, portfolio manager at Pzena Investment Management, which manages more than US$60 billion (S$80.7 billion) and owns Citi shares. "We are confident the bank can control expenses after the reorganisation", and it has strong growth prospects in corporate banking, he said.

Citigroup shares have risen by 49 per cent since it announced the overhaul in mid-September, outpacing a 26 per cent climb for the KBW Bank Index.

The bank's stock trades at 0.57 of book value, a measure of performance that falls short of JPMorgan Chase's 1.73 or Bank of America's 1.1.

But the company's turnaround efforts also caused internal turmoil. Workers avoided signing up to long-term projects during the six-month reorganisation because they were unsure if they would be laid off, said a source who declined to be identified discussing personnel matters.

The process was lengthy because it affected many levels of the organisation, said a separate source close to the company.