Citigroup, the largest organizational restructuring in 20 years has begun! Starting with a top-level clean-up, over 300 senior managers will be laid off.

Citigroup CEO Jane Fraser, who took office with plans to streamline operations, is reportedly planning to cut over 300 senior management positions.

According to sources familiar with the matter, Citigroup will begin issuing layoff notices starting from the 20th, primarily affecting senior managers two levels below the CEO, accounting for approximately 10% of the total number of positions at that level.

Citigroup confirmed in a statement that the company has been continuously adjusting its organizational structure and did indeed "communicate the next stage of organizational structure adjustments to some business units" on Monday. The statement did not disclose specific layoff figures but stated, "As far as we know, the ongoing restructuring initiatives include some difficult and impactful decisions, but we believe these are the right steps to reshape the company in line with strategic development requirements and ensure the continued delivery of high-quality services to our clients."

Earlier reports indicated that the layoff rate for Citigroup management positions would exceed 10% as Fraser pushes for the elimination of regional managers, co-heads, and other overlapping roles. For example, all HR and administrative executive positions throughout the bank will be streamlined, and positions in operations that have already been divested or restructured are at high risk of being cut. In an internal memo to Citigroup employees, Fraser stated, "Building a successful bank requires a great deal of dedication, hard work, and resilience from every employee. I fully recognize that our expectations for employees are high."

According to the memo, Citigroup expects to announce the next stage of organizational structure adjustments early next year and complete all restructuring plans before the end of the first quarter. Citigroup's stock price rose 0.4% during Monday's trading session, reaching $45.55. The company's stock price has remained relatively unchanged this year.

The scale of this organizational restructuring will be the largest for Citigroup in 20 years, including the abandonment of two core operating divisions and a focus on five major businesses: trading, banking, services, wealth management, and U.S. consumers. Even before the restructuring plan was announced, Citigroup had already laid off approximately 7,000 employees in the first nine months of this year, resulting in $650 million in severance costs.

Nevertheless, the company's headcount has remained stable at around 240,000 employees over the past four quarters, making Citigroup second only to JPMorgan Chase in terms of employee numbers, although the latter's profit margin is much higher than Citigroup's.

As previously reported by Wall Street News, Citigroup has lagged behind other major Wall Street banks in various performance indicators of investor concern. To turn the tide, Citigroup has changed its CEO three times since 2007, with the situation worsening before Fraser took over in early 2021. Currently, Citigroup's market price-to-tangible book value ratio is only 0.49, less than half of its main competitors and only one-third of Wall Street leader JPMorgan Chase.

Analysts believe that in terms of total asset size, the cost of Citigroup's layoffs is enormous. The bank's stock price has been stagnant for decades, with underperforming results and continuously lowered guidance. If the layoffs fail, Citigroup may resort to more aggressive measures to unlock value, such as spinning off the company. Citi CEO Jane Fraser previously pledged to increase the return on investment of Citi stocks to at least 11% in the coming years, which is an important goal in helping the company's stock price recover. To achieve this goal, Citi needs to increase revenue, improve efficiency, and reduce costs. However, analysts point out that with the slowdown of the US economy, increasing revenue has become increasingly difficult, leaving only the option of cost reduction.

Analysts also note that investors do not expect Citi to increase the return on investment to 25% to 26%, but if Citi's return cannot exceed its cost of capital, which is approximately 10%, there is no reason to continue investing. Currently, Citi expects costs to start decreasing in the second quarter of next year.