Citigroup is set to embark on one of the largest layoffs on Wall Street in recent years, with a 10% reduction in certain business areas, particularly affecting senior executives.

According to reports, internal sources at CitiGroup, who are involved in consulting on the company's restructuring, are currently discussing plans to lay off at least 10% of staff in several key business areas, with management positions facing a layoff rate of over 10%. The discussions on this layoff plan are still in the early stages, and the numbers may change in the coming weeks.

CitiGroup CEO Jane Fraser announced a restructuring plan in September of this year, stating that the restructuring would result in an unspecified number of layoffs, causing concern among the bank's 240,000 employees. The restructuring plan will have a larger impact on senior management, with Fraser reportedly calling for the elimination of regional managers, co-supervisors, and other positions with overlapping responsibilities.

Compared to other Wall Street banks, CitiGroup has been lagging behind in various performance indicators that investors are concerned about. In an effort to turn things around, the bank has changed leadership three times since 2007, and the situation has worsened even further before Fraser took over in early 2021. Currently, CitiGroup's market value to tangible asset net worth 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 the only thing Fraser can do at the moment is to carry out large-scale layoffs. "She needs to make a big move, and I think this is a good opportunity. The scale and pain of the layoffs may exceed the expectations of CitiGroup employees," one analyst said.

If Fraser decides to lay off more than 10% of the workforce, it will be one of the largest layoffs on Wall Street in recent years. Due to regulatory pressure, CitiGroup's labor costs have been soaring under Fraser's leadership. Other major banks have been laying off employees this year, but CitiGroup's workforce has remained at 240,000, making it second only to JPMorgan Chase in terms of employee numbers, but with much lower profitability.

Insiders say that the next step in Fraser's layoff plan will be announced when the bank releases its fourth-quarter earnings report in January next year. Analysts believe that in terms of total asset size, the cost of layoffs at CitiGroup will be enormous. The bank's stock price has been stagnant for decades, with underperforming results and continuously lowered guidance, and analysts have long called for Fraser to carry out layoffs. If the layoffs fail, CitiGroup may resort to more aggressive measures to unlock value, such as spin-offs.

Fraser has previously promised to increase the return on investment of CitiGroup's stock to at least 11% in the coming years, which is also an important goal for the company's stock price recovery. To achieve this goal, CitiGroup needs to increase revenue, improve efficiency, and reduce costs. However, analysts believe that with the slowdown in the U.S. economy, increasing revenue has become increasingly difficult, leaving only the option of cost reduction.

Analysts also point out that investors do not expect CitiGroup to increase its return on investment to 25% to 26%, but if the bank's return on investment cannot exceed its cost of capital, which is around 10%, there is no reason to continue investing.

It is reported that Fraser has appointed Titi Cole, head of the bank's traditional franchise business, to oversee the restructuring. Cole joined CitiGroup in 2020 and has previously worked at institutions such as Wells Fargo and Bank of America, which have also faced issues of bloated organizational structures. Boston Consulting Group is also playing a key role in the restructuring, responsible for developing CitiGroup's organizational structure chart, tracking key performance indicators, and providing recommendations. Meanwhile, a person who recently left Citigroup said that morale within the company is extremely low. Employees are unsure whether they or their supervisors will be affected by the layoffs and everyone is preparing for the worst.

Although the final number of layoffs will not be announced for several weeks, insiders say that some things are certain. One of them is that the management's layoff rate will exceed 10% because Jane Fraser is pushing for the elimination of regional managers, co-supervisors, and other overlapping positions. For example, all HR and administrative executive positions throughout the bank will be streamlined, and there is a high risk of layoffs for operational positions that have already been divested or restructured.

Citigroup currently expects costs to start decreasing in the second quarter of next year. In a statement, the company said it is committed to unlocking its full potential and fulfilling its commitments to investors. "We recognize that restructuring is a difficult and impactful decision for the company, but it is also the right step based on the strategic adjustment of the architecture."

On Monday, Citigroup's stock price fell 0.63% to $41.99 in midday trading. The stock has already declined more than 8% this year.