Citigroup considers deep job cuts for CEO Jane Fraser’s overhaul, called ‘Project Bora Bora’

When Citigroup CEO Jane Fraser announced in September that her sweeping corporate overhaul would result in an undisclosed number of layoffs, a jolt of fear ran through many of the bank’s 240,000 souls.

“We’ll be saying goodbye to some very talented and hard-working colleagues,” she warned in a memo.

Employees’ concerns are justified. Managers and consultants working on Fraser’s reorganization — known internally by its code name, “Project Bora Bora” — have discussed job cuts of at least 10% in several major businesses, according to people with knowledge of the process. The talks are early and numbers may shift in coming weeks.

Fraser is under mounting pressure to fix Citigroup, a global bank so difficult to manage that its challenges consumed three predecessors dating back to 2007. Already a laggard in every metric that matters to investors, the bank has fallen further behind rivals since Fraser took over in early 2021. It trades at a price-to-tangible book value ratio of 0.49, less than half the average of U.S. peers and one-third the valuation of top performers including JPMorgan Chase.

“The only thing she can do at this point is a really substantial headcount reduction,” James Shanahan, an Edward Jones analyst, said in an interview. “She needs to do something big, and I think there’s a good chance it’ll be bigger and more painful for Citi employees than they expect.”

If Fraser decides to part with 10% or more of her workforce, it would be one of Wall Street’s deepest rounds of dismissals in years.

Burdened by regulatory demands that hastened the retirement of her predecessor Mike Corbat, Citigroup’s expenses and headcount have ballooned under Fraser. While competitors have been cutting jobs this year, Citigroup’s staff levels remained at 240,000. That leaves Citigroup with the biggest workforce of any American bank except the larger and far more profitable JPMorgan.

An update on Fraser’s plan and its financial impact will come in January along with fourth-quarter earnings.

The stakes are high for America’s third largest bank by assets. That’s because, after decades of stock underperformance, missed targets and shifting goal posts, Fraser is taking steps analysts have long called for. Failure could mean renewed calls to unlock value by taking even more drastic actions like dismantling the company.

Fraser has vowed to boost Citigroup’s returns to at least 11% in the next few years, a critical goal that would help the bank’s stock recover. To get close, Citigroup needs to increase revenues, use its balance sheet more efficiently and cut costs. But revenue growth may be hard to achieve as the U.S. economy slows, leaving expense cuts the biggest lever to pull, according to analysts.

“Not one investor I’ve spoken to thinks they’ll get to that return target in ’25 or ’26,” analyst Mike Mayo of Wells Fargo said in an interview. “If they can’t generate returns above their cost of capital, which is typically around 10%, they have no right to stay in business.”

Fraser put Titi Cole, Citigroup’s head of legacy franchises, in charge of the reorganization, according to sources. Cole joined Citigroup in 2020 and is a veteran of Wells Fargo and Bank of America, institutions that have wrestled with expenses and headcount in the past.

Boston Consulting Group has a key role as well. The consultants have been involved in mapping out the bank’s organization charts, tracking key performance metrics and making recommendations.

Although the project’s code name evokes the turquoise waters of Tahiti, employees have been anything but calm since Fraser’s September announcement.

“Morale is super, super low,” said one banker who left Citigroup recently and has been contacted by former colleagues. “They’re saying, ‘I don’t know if I’m getting hit, or if my manager is getting hit. People are bracing for the worst.”

The ultimate number of layoffs will be determined in coming weeks as the massive project moves from management layers to rank-and-file workers. But some things are already clear, according to the people, who declined to be identified speaking about the confidential project.

Executives will see cuts beyond 10% because of Fraser’s push to eliminate regional managers, co-heads and others with overlapping responsibilities, they said.

For instance, chiefs of staff and chief administrative officers across Citigroup will be pruned this month, said one of the people with knowledge of the situation.

Operations staff who supported businesses that have been divested or reorganized are also at higher risk of layoffs, said the people.

Even if Fraser announces a large reduction in workers, investors will probably need to see expenses drift lower before being convinced, said Pierre Buhler, a banking consultant with SSA & Co. That’s because of the industry’s track record of announcing expense plans only to see costs creep up.

Still, it’s up to Fraser and her deputies to sign off on the overall plan, and they may opt to deemphasize expense savings. The project is primarily about removing unnecessary layers to help Citigroup serve clients better, according to a current executive.

Publicly, the bank has only said that costs would start to ease in the second half of 2024.

Citigroup declined to comment beyond this statement:

“As we’ve said previously, we are committed to delivering the full potential of the bank and meeting our commitments to our stakeholders,” a spokeswoman said. “We’ve acknowledged the actions we’re taking to reorganize the firm involve some difficult, consequential decisions, but they’re the right steps to align our structure to our strategy and deliver the plan we shared at our 2022 Investor Day.”