Citigroup Inc. Continues Overhaul, Closes Distressed-Debt Business in Strategic Move

Citigroup Closes Distressed-Debt Business in Strategic Move | The Enterprise World

(Source – CNBC)

Citigroup Inc. is reportedly taking another significant step in Chief Executive Jane Fraser’s ambitious restructuring plan, closing its global distressed-debt business, according to sources familiar with the matter. This move follows the recent announcement that the major Wall Street bank would be shutting down its municipal bond group by the end of March.

The distressed-debt desk, responsible for trading the bonds and securities of companies in or nearing bankruptcy, currently employs around 40 individuals, as reported by CNBC. Bloomberg sources indicated that the closure is anticipated to impact approximately 20 positions within the bank.

Streamline Citigroup bank’s operations and improve its performance metrics

CEO Jane Fraser has been executing a comprehensive overhaul of Citigroup, marked by a strategic shift away from businesses delivering poor returns. This latest move is aligned with Fraser’s broader initiative to streamline the bank’s operations and improve its performance metrics.

The decision to close the distressed-debt group is part of Citigroup’s ongoing effort to exit businesses that may hinder the achievement of Fraser’s performance targets. The bank aims to enhance its overall competitiveness and financial outlook through these strategic adjustments. Fraser, who unveiled the restructuring plan, internally dubbed “Project Bora Bora,” in September, has been actively trimming executives and scaling back certain business units.

The move to close the municipal-bond trading operations, announced last week, reflected Citigroup’s commitment to refocusing its resources on more profitable ventures. The municipal bond group, which once thrived with around 100 employees, faced challenges in recent times, leading to the decision to shutter the business.

Commitment to optimizing its business portfolio

Citigroup’s restructuring efforts underscore a broader trend in the banking industry, where institutions are reevaluating and reshaping their portfolios to adapt to changing market dynamics and enhance financial performance.

As Citigroup closes its distressed debt business, the bank is expected to concentrate on core operations with greater potential for sustainable growth. However, the decision has implications for the affected employees, and the exact details of the impact on staffing and positions remain to be officially disclosed.

In response to queries about the reported closure, Citigroup has not provided an immediate comment. The closure of the distressed debt unit is another step in Citigroup’s strategic evolution under Jane Fraser’s leadership, signaling the bank’s commitment to optimizing its business stock portfolio and navigating the evolving landscape of the financial industry.

The memorandum further stated that the bank intends to disband the unit in the initial quarter, with the majority of its personnel departing. Last month, deliberations regarding the unit’s future resulted in a group of bankers departing for Jefferies. Bloomberg initially reported on the memo on Thursday.

Citi’s municipal offering business has faced scrutiny from the Texas attorney general. In January, the attorney general took action to suspend the bank’s capacity to underwrite the majority of municipal bond offerings in Texas. The reasoning behind this action was the allegation that the bank had engaged in discriminatory practices against the firearms sector.

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