Jane Fraser is renewing herself at Citigroup

But Citigroup, which used to be the world’s largest financial services company, is struggling to keep up with rivals. As a Goldman Sachs Group Inc.

and Morgan Stanley are reaching new highs in market value, Citigroup is half of what it was in 2006. Its profit and revenue, once almost double that of other major banks, have now been surpassed by JPMorgan Chase & Co. and Bank of America Corp E, last fall, regulators ordered the overhaul of vast systems that underpin its expanding operations, raising new questions about the bank’s complexity.

Fraser, the first woman to run a major US bank, now needs to reinvigorate the $ 2.3 trillion giant.

It will have to juggle to respond to regulators’ concerns – an expensive, multi-year project – with a reassessment of the bank’s strategy. Mrs. Fraser, 53, has already launched a “refreshment” that she hopes to simplify the bank inside and out, making it easier to operate and improve.

Simplifying Citigroup is a path similar to what its predecessors, Michael Corbat and Vikram Pandit, tried. But Ms. Fraser believes there is more to be done.

“I’m not looking for what’s wrong,” said Fraser in an interview. “I’m looking for what Citi will be and what is working.”

What Citigroup is today is part of the problem.

The bank is a giant on Wall Street, serving multinational corporations and credit cards. It is second tier in the United States consumer banks.

Returns tend to improve with scale at consumer banks, and rivals Bank of America and JPMorgan have overloaded their retail operations with thousands of branches in cities across the country. Citigroup has fewer than 700 branches in just a handful of cities, instead betting on a heavily digital banking future, including a future partnership with Google.

Citigroup’s power comes from its global corporate bank. It has operations in 96 countries, helping governments and companies to move money around the world. It is also a leader in increasing corporate debt and marketing on Wall Street. But these companies don’t get as high returns as before, under pressure from crisis-era regulations.

The combination underperformed rival mega-banks, which kept profits high with a better balance between their Wall Street and Main Street businesses. Analysts and investors argued that Citigroup needs to restructure, with suggestions on how to abandon all of its international consumer operations or buy an American bank. Activist investor ValueAct Capital called for changes to focus on institutional business.

“There is little doubt that the two-decade experiment that is Citigroup has failed in every respect,” said Mike Mayo, a longtime bank analyst and critic at Citigroup.

Fraser did not telegraph his plans, but executives said the strategic review would create significant changes. Citigroup recently announced an expansion of wealth management operations. The bank is likely to abandon its consumer operations in parts of Asia, including South Korea and Vietnam, people familiar with the matter said. He does not plan to leave the institutional bank in any country, according to one person.

Chief Financial Officer Mark Mason said the decisions will not be based solely on the financial return metrics that have fueled the discussion around Citigroup for years.

“I think what our investors are hearing is: tell us how and why the strategy you created makes sense,” said Mason. “So, tell us what it means in returns.”

But it is unclear whether immediate plans will be enough to appease critics. The request for regulatory consent can block any substantial acquisition for now. And some investors and analysts want Citigroup to dispose of its consumer bank in Mexico or end stock trading, which has not grown as expected. Neither is likely at this point, according to people familiar with the bank’s plans.

Fraser said Mexico’s consumer bank, which was swept away by allegations of fraud several years ago, has a “wonderful scale”, a key barometer for its analysis. Getting rid of the deal would be costly because the unit is tied to a portion of Citigroup’s balance sheet goodwill. With stock trading, executives say the benefits to customer relationships are too great, even if investors don’t realize it.

This could leave investors waiting for a second round of restructuring soon.

Today’s Citigroup was created in 1998, a merger of consumer-oriented Citicorp and the Wall Street bankers of the Travelers Group. Executives envisioned a single megabank where companies could manage their finances and travelers traveling the world could always find a Citi ATM.

But Citigroup’s business continued to operate as silos, and the benefits of the merger did not materialize as expected. The bank has repeatedly clashed with regulators. During the financial crisis, it almost collapsed under the weight of toxic mortgage-backed securities. Since then, it has sold assets it considered too risky or secondary, such as a British musical empire, a stake in a Mexican airline, a subprime lender and the broker Smith Barney.

Ms. Fraser came to Citigroup in 2004 after stints at Goldman Sachs and McKinsey & Co. During the financial crisis, she headed the bank’s strategy division, helping to lay the groundwork for asset sales.

She jumped from job to job, running Citigroup’s private bank for the ultra-arches, the destroyed mortgage unit and the Latin American operations that hit the scandal. This gave him experience in many parts of the company, although some people say it made it difficult to assess his operational success.

People who worked with her said that she makes decisions quickly and that she can think strategically in the long run while also running a business. Even when she cuts jobs, they say, she empathetically envelops her messages.

She is also known for her pranks. In January, when Mr. Mason entered the morning meeting of Zoom’s executive team, he found all of his colleagues sitting in front of a photo of him 20 years ago. It was his birthday at Citigroup. Mrs. Fraser kept it in the background all day.

Citigroup announced in September that it would become CEO. Regulators were increasing the pressure on the bank’s risk management systems, and Corbat decided to resign because he felt it would be better to leave such an expensive, multi-annual project in the hands of a successor.

Ms. Fraser said that the regulatory issue is her highest priority. The bank delivered in February to diagnose its risk problems and executives said the relationship with regulators is productive. She defined work as a “transformation”, an opportunity for the bank to make changes that were already necessary and were competitively important.

For example, regulators complained that the bank did not have clear customer data. Citigroup never built a unifying customer identification system across all of its businesses. Correcting this would appease regulators and help bankers deepen their relationships with customers, executives said.

Ms. Fraser said she knows that work will be a difficult task, but that she does not expect her first day as CEO to be any different. It is scheduled for a city hall, a meeting with new employees and some customer calls. She is also planning to call some former colleagues and others to thank her.

Write to David Benoit at [email protected]