Citi's (C) 'Fixer' Jane Fraser Breaks Glass Ceiling - Bove

Citigroup (NYSE: C) announced yesterday that Jane Fraser will become the new Chief Executive Officer. This way, Fraser becomes the first woman CEO of a U.S. megabank.

Dick Bove, a senior research analyst at Odeon Capital Group, describes Frasers as a “brilliant lady”, which is best described as Citi’s “fixer”.

“Over the past dozen years, where there was trouble there was Ms. Fraser. She was the head of the company’s strategy unit during the period when the bank accelerated its departure from a number of businesses. She worked with ex-Chairman Mike O’Neill and CEO Mike Corbat to establish the bank’s new operating strategy,” Bove wrote in a note to clients issued yesterday.

He outlines a few of Fraser’s stints where she was asked to fix apparent problems, starting from Citi’s private bank, over solving mortgage issues, to moving to Latin America to fix the consequences from the bank’s fraud scandal in Mexico.

“The bank is now dealing with yet another problem due to the breakdown of its technology in the Revlon Scandal. When this crisis was announced I lowered the rating on the stock to Sell under the theory that government regulators would swarm into this company to determine if there were other issues with its technology related to BSA/AML. I cannot prove that this is happening but I believe it is,” writes Bove.

However, Bove writes that even Fraser may not be able to fix Citi’s business model, that simply doesn’t work. He notes that Citi cannot grow fast enough, even after getting rid of tens of billions of dollars in common equity.

“The current format is not robust enough to deal with 21st century banking. Major changes are needed once again. The company’s revenues in 2019 were below where they were in 2000. The most important need for this company is to stop relying on shrinking businesses and giving away capital and start thinking about what is necessary to succeed as an international bank in this century”.

“The most critical variable needed to turn this bank into a growth entity is the ability to make loans,” says Bove, before concluding that Fraser is the right person for this challenge.

Citigroup is rated as “Sell” by Odeon, with a price target of $46 per share, which is around 10% lower than the current market price of $50.95.

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