Insider Finance - Business - Insider Today: Big banks are screwed

September 14, 2023 • 5 min read

with Dan DeFrancesco

Almost to the weekend! Changing phone chargers is already a massive headache, but now you have the bonus of electrocuting your new iPhone 15 if you use the wrong USB-C plugin.

Speaking of shocks, Citigroup announced a massive overhaul on Wednesday that’ll reportedly lead to job cuts. It’s the latest example of the pressure big banks are under to keep their place atop Wall Street. More in today’s big story. 

What’s on deck:

But first, we’re going to switch things up.

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REUTERS/ Keith Bedford

The big story

Citigroup shuffle

Ready or not, changes are coming to Citigroup.

The bank announced a massive overhaul Wednesday that’ll reduce management layers and almost certainly lead to job cuts. 

Insider’s Jennifer Sor has more on the reorg, deemed by CEO Jane Fraser as the most consequential change to Citigroup in nearly 20 years. 

Citigroup is pitching the move as a way to simplify its structure. Case in point: Fraser said the changes eliminated 35 committees.

Changes like these are bound to ruffle some feathers, but Fraser isn’t bothered by it. The reorg will “make some of our people very uncomfortable,” but the CEO said she’s “absolutely fine with that.”

That might seem like a harsh stance, but understand the bank needs tough love. Citigroup’s share price is down nearly 40% since Fraser took over as CEO in March 2021. 

To be fair, Fraser’s tenure has been an uphill battle. She inherited plenty of headaches from her predecessor, Michael Corbat. That included the bank accidentally wiring $900 million, which is the type of thing that’s typically frowned upon in banking.

But two-plus years later, problems persist. Before the announcement, the bank’s share price was down almost 9% this year, trailing all of its fellow big bank peers in the US except Bank of America.

Citi’s overhaul represents how big banks are scrambling to stay on top of a financial world passing them by. 

When news of Citi’s reorg broke, I immediately thought of Goldman Sachs. The prestigious investment bank has also grabbed headlines for its multiple reorgs amid a failed push into consumer banking under CEO David Solomon.

Meanwhile, my colleague Rebecca Ungarino pointed out that Wells Fargo has faced continued setbacks from a slew of fines over the years as CEO Charlie Scharf continues to work to right the ship.

Even the big bank having the best year — JPMorgan — isn’t completely happy. CEO Jamie Dimon recently quipped he “wouldn’t be a big buyer of a bank” in reference to proposed regulations requiring big banks to keep more money on the sidelines. 

But banks’ retrenchment could just signal an opportunity for others to fill in the gaps. Whether it’s fintechs or so-called shadow banks, there’s no shortage of players looking to offer services previously dominated by big banks.

That could be a welcome change, but there are risks to moving those services outside the walls of a highly regulated institution. 

Sometimes, the devil you know is better than the one you don’t.

3 things in

Markets

🔔 Before the opening bell: US futures rise early Thursday after stocks finished mixed on Wednesday.

Robert Nickelsberg/Getty Images

1. Inflation is sticking around. The Consumer Price Index rose by 0.6% month over month in August, while core CPI increased 0.3%. The latest numbers mean there's a decent chance of another rate hike before the end of the year, according to some estimates.

2. Stock picks for bears and bulls. Bank of America analysts believe the economy has turned the corner and identified 50 stocks positioned to excel during a recovery. But if you’re feeling bearish, Morgan Stanley picked nine stocks that’ll allow you to hedge against the risk of a downturn. 

3. The FIRE movement — Financial Independence, Retire Early — isn’t always lit. Retiring young sounds great, but it can come with its own set of challenges. Five early retirees detailed problems with managing their money and finding a sense of purpose.

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3 things in

Tech

Arantza Pena Popo/Insider

1. “I moved to Seattle for a high-paying tech job. It turned out to be the loneliest time of my life.” A recent grad moved from New York City for a software engineering role at Amazon, but nobody told him how difficult making friends would be. 

2. Startup funding woes. VC funding for young startups is becoming more scarce — it’s fallen for the fourth quarter in a row. Meanwhile, many startup founders are beginning to turn away from VC funding due to their “debilitating” influence after investing.

3. Apple’s iPhone 15 event was revealing about its business. Wall Street had a pretty mixed reception of the new device. And while Apple celebrates the launch publicly, it’s internally grappling with an increased reliance on China that could cost the company billions.

3 things in

Business

Nicole Zaridze

1. Hidden fees are about to get a lot more hidden. The recent push to eliminate junk fees means they’re now folded into the upfront price — making it even harder to see them. 

2. A tiny-home startup endorsed by Elon Musk and Post Malone has got a regulator’s attention. Three former Boxabl employees told Insider they were recently contacted and interviewed by the SEC. The news comes after an Insider report earlier this year about production problems and questionable governance at Boxabl. 

3. Some workers are super commuting to avoid moving. Amid the return-to-office push, some workers — from interns to CEOs — are making extra-long commutes multiple times a week instead of moving closer to the office.

In other news

What's happening today

Joey Hadden/Insider

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The Insider Today team

Dan DeFrancesco, senior editor and anchor, in New York City. Diamond Naga Siu, senior reporter, in San Diego. Hallam Bullock, editor, in London. Lisa Ryan, executive editor, in New York.

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