Recently, Citi has been adding insult to injury: earnings season results did not meet expectations, profit to loss; at the same time, the restructuring of the structure is still not over, this fiscal season, Citi decided to lay off 20,000 people.
Despite the situation, Warren Buffett, who has been a stakeholder in Citi for two years, has not backed down: on January 18, Citibank CEO Jane Fraser said Thursday that at a luncheon, the stock god Warren Buffett still encouraged her to continue her restructuring efforts, according to media reports.
Some analysts believe that Buffett has this move because he invested in Citibank's core investment logic is "reversal of fortune".
Over the past three years, Citibank CEO Jane Fraser's restructuring strategy aims to improve the efficiency and profitability of Citibank, and Buffett's investment philosophy has always emphasized value investing and long-term holding coincide.
In the wake of the financial crisis, Citibank lagged behind the industry average in terms of profitability and valuation levels, with data showing that the bank's return on capital was solidly in the bottom half for several years.
Jane Fraser assumed the role of CEO of Citibank in March 2021, an important point in the history of Citibank.
In the face of Citi's difficulties, she undertook a radical overhaul and proposed a series of restructuring measures, which were largely based on streamlining the business and reducing costs, with the aim of improving efficiency and profitability: these included streamlining the bank's operations, trimming management, and shutting down a number of overseas business units.
After a series of restructuring measures, Citi made some progress, although the market did not fully buy it - they did not believe that Fraser could save the day. But Fraser's move caught Buffett's attention: Berkshire Hathaway invested heavily in the bank's stock after Citi implemented major reforms.
Citibank is a "unique" departure from Buffett's previous investment preferences: in the past, Buffett favored large, U.S.-centric financial institutions, but Citibank is a highly international company with a history of problems.
Some analysts believe that Buffett invested in Citibank's core investment logic, lies in the "predicament reversal".
Buffett's investment in Citibank and Fraser's restructuring plan is a strategic resonance: Buffett's investment philosophy has always emphasized value investing and long-term holding, and his investment in Citibank may indicate that he sees the potential of Citibank under Fraser's leadership; while Fraser's restructuring plan is facing challenges, but the core of the plan is to increase the long-term value of Citi, which is consistent with Buffett's investment philosophy. investment philosophy.
Most recently, Fraser promised that 2024 would be a turning point for Citi, with the latest restructuring maneuver ending in March, and hopes to achieve an 11% to 12% return on equity.
The market is currently in a wait-and-see mode, waiting for Citi to prove its worth.
Analysts believe that the next 12 months will be a critical period for Citi's transformation, when restructuring costs are expected to fall and return on equity is expected to improve, which may be why Buffett is still holding on.