Citigroup chief executive Jane Fraser has sparked speculation on Wall Street about a three-way race to be her heir apparent, after tapping a trio of outsiders with impressive résumés to aid her turnaround of the underperforming bank.
Executives from the accounting firm PwC and rival banking behemoth JPMorgan Chase — Tim Ryan and Vis Raghavan, respectively — joined Citi last week, alongside Andy Sieg, who was brought in from Bank of America last year. The trio round out a leadership team that Fraser hopes will invigorate a profit-boosting reorganisation — and which investors say could produce an alternative leader if Fraser’s turnaround stalls.
“She has brought in very talented individuals,” said Brian Mulberry, a director at Zacks Investment Management, which holds Citi shares.
Fraser has led Citi for three years — not a long tenure in the current era of major Wall Street bank chiefs. Last autumn she launched its biggest revamp in over a decade in the hope of revitalising the US’s fourth-largest bank, which has lumbered since its near-collapse in the financial crisis.
Who she is leaning towards as a potential successor could indicate what business lines she views as the core of the group’s future. But anointing an outsider as her heir apparent could also alienate veterans who have their own leadership ambitions, and are already uneasy with the move to fill top roles from the outside.
The hires have set off a watch-the-throne parlour game, one of Wall Street’s favourite idle pastimes.
“That’s what she’s doing,” said a portfolio manager at a fund that holds Citi shares, who views the new hires as an effort to address a lack of qualified chiefs-in-waiting. “They are in a strategic quandary, and [Fraser] is probably doing the best she can at muddling through.”
Analysts, investors and insiders say Fraser has no plans to leave anytime soon. Sieg has told associates he is focused on his current role and finds talk of succession a distraction. Raghavan told Fraser during the interview process that he was not interested in her job, according to a person who spoke with him. Ryan has told associates that he came to Citi to “work for Jane”.
A bank representative declined to answer specific questions about the three men’s’ potential futures. “Like any well-run company, Citi’s board of directors takes very seriously our responsibility to have a sound CEO succession plan in place,” the bank’s board said in a prepared statement.
Citi still has a lot of catching up to do. The corporate and investment bank lost $48mn last year. Citi’s expenses as a percentage of revenue remain significantly higher than rivals.
Its return on equity, a key measure for banks, is in the single digits, about half of what rivals produce, and Fraser has promised to match those levels after Citi completes a lay-off target of 20,000 job cuts. Nonetheless, the bank recently began signalling to employees that cuts are over for now, despite being less than halfway to that goal.
Of the three hires, the most high-profile on Wall Street has been Raghavan, a 20-year veteran JPMorgan dealmaker, who is getting a bigger management role at Citi than he had at JPMorgan, and a better shot at one day becoming the chief executive. Fraser named Raghavan a vice-chair of all of Citi in addition to the role of running its newly combined investment and corporate banking division.
Earlier this year, JPMorgan had named Raghavan, 57, the global head of its entire investment bank. He left just a month later to take the job at Citi.
“The number of people who trust, respect and admire Vis is quite large,” said a former colleague. “But when you bring in people like [Raghavan], you are bound to lose some of your existing talent.”
That scenario is playing out in Citi’s wealth division, which has been hit with about 20 senior departures since former top Bank of America executive Sieg took over the unit in September. He has turned off some Citi vets by insisting that private bankers document client contacts.
Sieg, also 57, spent the early part of his career in Washington. One of his first assignments at what was then Merrill Lynch was to be the point person for chief executive at the time David Komansky on the firm’s push for the repeal of Glass-Steagall, the Depression-era law that separated banking from other parts of financial services and which was repealed in the late 1990s.
“Andy doesn’t micromanage, but he does pressure-test you to make sure you know what you are doing,” says a former BofA colleague.
The latest hire is Tim Ryan, who last month left his role as the top US executive at global accounting firm PwC to join Citi. At Citi, Ryan will be in charge of technology and will help with Citi’s continued transformation, taking over roles from both Mike Whitaker and Titi Cole, two top executives that Citi said last month were leaving the firm.
“Tim is a great strategic thinker and a get-it-done kind of guy,” said Bob Herz, a former PwC partner who went on to run the Financial Accounting Standards Board.
A PwC lifer, Ryan, 59, rose through the firm’s financial services practice with a reputation for integrity. As the auditor of AIG on the eve of the financial crisis, he correctly resisted pressure to give the company a clean bill of health.
“Jack Welch had three executives in waiting for his job running GE — this is not a new strategy for recruiting and retaining top executives,” said Gary Goldstein, veteran Wall Street recruiter and head of search firm Whitney Group. “I think each one of them believes they have the inside track.”
Additional reporting by Brooke Masters and Arash Massoudi.
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