Which Wall Street firm could be about to break up high-profit unit?

Citigroup Inc. Chief Executive Jane Fraser is weighing a plan to break up the company’s biggest unit in a restructuring that would give her more power, the Financial Times reported, citing people familiar with the matter. 

The Wall Street firm is weighing a split of the Institutional Clients Group, which made nearly three-quarters of the bank’s profit last year — into three segments including investment and corporate banking, global markets and transaction services, according to the FT. 

The heads of the newly created divisions would then report directly to Fraser. If adopted, it would mark the biggest overhaul in nearly 15 years. A spokesperson for Citigroup in Hong Kong declined to comment on the report. 

The ICG unit brought in $41 billion in revenue last year and was responsible for $10.7 billion of Citi’s $14.8 billion of net income in 2022. Last month, the lender reported that the division’s revenue for the quarter through June was down 9% year-on-year, reflecting declines in markets and investment banking although services revenues increased.

“Our Services businesses continued to deliver strong revenues, with Treasury and Trade Solutions and Securities Services both up a healthy 15%,” Fraser said in the bank’s second-quarter results statement.

YBARRA EXIT

The restructuring comes after the bank said earlier in August that Paco Ybarra, one of Fraser’s top deputies, will leave after 36 years at the bank. He will leave in the first half of 2024 having held a variety of roles in the firm’s trading division before being named head of the institutional business in 2019.

As part of Fraser’s moves to improve the bank’s returns, Ybarra worked on investing in two of the firm’s most profitable businesses: treasury and trade solutions and securities services. He also oversaw Citigroup’s moves to curtail business with some of its least-profitable clients in a bid to help boost returns in the firm’s markets business. 

Fraser didn’t name a successor for Ybarra, nor did she mention a search to replace him. She instead said that Citigroup will use the coming months to determine how to transition his responsibilities in a way that lines up with the firm’s work to simplify its organizational structure.