Citigroup CEO Jane Fraser's restructuring initiative, known as "Project Bora Bora," is under scrutiny as it anticipates job cuts of at least 10% across various principal divisions. The announcement has caused a surge of concern among employees. The final count of layoffs, which could see executives facing cuts beyond the projected 10%, especially those in roles with overlapping responsibilities and operations staff supporting divested or reorganized businesses, will be settled in the upcoming weeks.
The bank has been grappling to match its competitors since Fraser took over in early 2021. Citigroup's price-to-tangible book value ratio stands at 0.49, considerably lower than market leaders like JPMorgan Chase (NYSE:JPM). Analysts from Edward Jones and Wells Fargo have both stressed the importance of a substantial workforce reduction from its current 240,000 employees. This step is seen as crucial for Fraser to enhance the bank's performance and achieve her target of elevating Citigroup's returns to at least 11%.
Titi Cole, Citigroup's head of legacy franchises, is spearheading the restructuring alongside Boston Consulting Group. Despite its peaceful codename, "Project Bora Bora" has created significant stress among employees. Banking consultant Pierre Buhler has pointed out that investors will need to see a decrease in expenses before gaining confidence in the plan's effectiveness.
Fraser revealed this significant restructuring plan during a hearing at the Rayburn House Office Building. Positions such as chiefs of staff and chief administrative officers are also at high risk of cuts. The plan and its financial impact are expected to be updated in January along with the announcement of fourth-quarter earnings.
InvestingPro Insights
Citigroup, a prominent player in the banking industry, has seen a significant return over the last week, as per InvestingPro data. The market cap stands at 80.88B USD, with a revenue of 72.55B USD as of Q3 2023. The company's adjusted P/E ratio is at 6.58, showing that it is trading at a low earnings multiple.
InvestingPro Tips suggest that the bank's revenue growth has been accelerating, and six analysts have revised their earnings upwards for the upcoming period. This could be a sign of potential growth despite the ongoing restructuring. On the other hand, the bank has been quickly burning through cash and suffers from weak gross profit margins, which might be some of the reasons behind the restructuring initiative.
InvestingPro offers a wealth of additional tips and data for those interested in the financial health and future of Citigroup and other companies. For instance, there are 8 more tips related to Citigroup currently listed on InvestingPro, providing a more comprehensive understanding of the company's financial situation.
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