Citi has delivered strong financial results this quarter, exceeding Wall Street expectations, but its CEO Jane Fraser faced tough questions regarding the bank’s regulatory situation, particularly on whether the institution could face an asset cap. The speculation began after U.S. Senator Elizabeth Warren urged regulators to impose growth restrictions on Citi, claiming the bank had grown “too big to manage.”
Speaking at an investor call, Fraser was asked multiple times about the potential for an asset cap, a scenario that could significantly limit the bank’s future growth. However, she firmly dismissed these concerns, stating: “Let me be crystal clear. We do not have an asset cap and there are no additional measures other than what was announced in July in place and not expecting any.” This clarification came after JPMorgan analyst Vivek Juneja pressed her for a direct answer.
The regulatory concerns stem from Citi’s ongoing struggles to address longstanding issues flagged by U.S. authorities. In July, the Office of the Comptroller of the Currency (OCC) and the Federal Reserve hit Citi with fines amounting to $135.6 million over delays in fixing its data management systems—issues the bank had pledged to resolve by 2020. The bank’s extensive “Transformation” initiative, which kicked off in 2021, was meant to overhaul its systems and processes to ensure compliance, with Citi investing a staggering $7.4 billion over the past three years and more than $3 billion allocated for this year alone.
Fraser highlighted some of the key achievements under the Transformation program, including the retirement of over 450 outdated applications in 2023 and lifting a decade-old Federal Reserve order related to anti-money laundering compliance. Still, questions around the pace of these improvements persist.
Wells Fargo analyst Mike Mayo, who initially raised the asset cap query, further challenged Fraser and Chief Financial Officer Mark Mason on why Citi’s Transformation was behind schedule. In response, Fraser acknowledged that the bank had been fined due to deficiencies in data management but stressed that significant progress had been made in other areas. “We moved swiftly to address it,” she explained, while adding, “Overall, I’m pleased with our progress.”
Mason also provided insights into the bank’s revised approach to the Transformation. The OCC now requires Citi to submit quarterly reviews to ensure adequate resources are allocated to the project. “It’s a mix of budgetary and strategic factors,” Mason said when asked if the delays were due to a lack of resources or strategy. He added that the bank is continuously monitoring which aspects of the initiative are on track and where adjustments need to be made, whether that involves injecting more resources or altering processes.
In an effort to accelerate progress, Citi appointed Tim Ryan as the new head of technology in September to co-lead the data improvement efforts alongside Chief Operating Officer Anand Selva. Ryan’s leadership comes as part of a broader push to address data governance across the bank’s various business units, which are integral to meeting regulatory demands.
With a dedicated workforce of 13,000 employees involved in the Transformation program, Fraser remains optimistic about Citi’s ability to resolve the issues at hand. Nevertheless, the pressure from regulators and analysts alike underscores the ongoing challenges the bank faces as it seeks to modernize its operations and avoid further scrutiny.
Fraser’s comments on the asset cap are likely to provide some relief to investors, but the road ahead for Citi’s transformation is still fraught with regulatory hurdles and tight oversight. For now, the CEO remains focused on driving the bank’s reforms forward, while managing the delicate balance of staying in regulators’ good graces and ensuring the bank’s continued growth.