Can Jane Fraser save Citigroup and herself?

One scoop to start: EY agreed to terminate a consulting contract and refund millions of pounds to Santander’s UK business after failings in its anti-financial crime work for the bank, said three people with knowledge of the matter.

In today’s newsletter:

• Jane Fraser asks staff to lean in

• The royal rug maker under scrutiny

• The Nomura banker stuck in China

Last call aboard the Jane Fraser train

Speaking to the bank’s 240,000 employees at a town hall last week, Citigroup boss Jane Fraser didn’t mince words: “Get on board” with her bold management overhaul, or “get off the train”, she said, according to people who heard the remarks.

The former McKinsey partner who became the first woman to head up a big bank on Wall Street in 2021 has a lot riding on whether her colleagues are up for the journey.

Citi’s shares have fallen by roughly a third since she took over two years ago, despite her efforts to boost the bank’s sagging valuation by focusing on more modest goals.

She’s now hoping that the unprecedented shake-up can fix Citi from the inside-out, and dispel any questions that may have arisen over her leadership.

Fraser’s plan to shift away from the bank’s top-heavy management structure comes alongside the departure of investment banking head Paco Ybarra, a 36-year Citi veteran who wielded outsize influence compared to some of his fellow executives.

The exit of Ybarra, whose division generated more than half of Citi’s $40.9bn first-half revenue in 2023, opens a window of opportunity for Fraser to make the most significant changes to reporting lines since taking over.

The bank will shift from its two main commercial and consumer businesses into five divisions comprising its primary business segments, essentially eliminating a previous layer of management that existed between Fraser and the heads of those units. It will also be organised around its US and non-US businesses, instead of having regional bosses.

The overhaul would “eliminate needless complexity” but Fraser acknowledged it would result in “saying goodbye to some very talented and hard-working colleagues”, Fraser wrote in a memo to staff earlier this month.

The hardline approach has drawn mixed results. Some were frustrated by the lack of detail, said people briefed on the matter.

Fraser and her team have yet to put a number on job cuts or a cost reduction target, or name who will lead its investment, commercial and corporate bank. Executive search firm Egon Zehnder has already contacted a number of high-profile names (who have frequented previous editions of DD) for the role.

Others have expressed enthusiasm for Fraser’s efforts to make difficult choices to stage a turnaround.

“We have incredibly high ambitions for this bank and, the train, it’s gonna move fast,” she said during the recent town hall.

Her comments seemed “un-Jane-like”, according to one person who has worked with her for years. But perhaps that’s exactly the point.

One way or another Citigroup’s fate, as well as Fraser’s, will be settled over the next 18-24 months.

The auditor ink stain on a UK carpet roll-up

Charles Koch is best known as the billionaire who turned his father’s 300-person oil and ranching business into America’s second-largest private company while reshaping Republican politics through a vast donor network.

But his eponymous company is now embroiled in a corporate fiasco unfolding on London’s junior stock market, involving a supplier of red carpets to the royal family, DD’s Rob Smith reports.

Shares in Victoria, which counts Koch Industries as one of its biggest shareholders, plunged as much as 20 per cent on Monday morning after its auditor Grant Thornton revealed it had identified “risk factors of fraud”, breaches of money-laundering regulations and “potential irregularities in respect of certain transactions” at a small subsidiary of the company called Hanover Flooring.

Victoria has said “there is no wrongdoing” at Hanover (you can read its full statement over at Alphaville) and the stock rebounded strongly in the afternoon.

But the stark audit warning is likely to cast further scrutiny over the highly leveraged carpet roll-up, which has acquired more than 20 other flooring companies around the world since New Zealand financier Geoff Wilding took the helm as executive chair in 2012.

(DD notes Wilding is not the typical chair of a British carpet company; we don’t think there are too many others who own a 200ft-long superyacht, complete with a see-through grand piano onboard.)

Koch Industries made its investment in Victoria in 2020 through its Koch Equity Development unit, which makes private equity and private credit style investments while applying the Wichita, Kansas-based company’s patented in-house “market-based management” philosophy.

Koch not only holds a nearly 11 per cent stake in Victoria, but also owns £225mn of preference shares that pay a fixed annual dividend. Koch’s preferred stock not only ranks ahead of common equity, but it can further dilute ordinary shareholders through warrants that guarantee the US conglomerate a minimum rate of return.

If Victoria’s financial tapestry starts to unravel in earnest, its legions of retail shareholders may find that their interests do not align with the boys from Wichita.

The Nomura banker stuck in China

On September 13, Charles Wang Zhonghe, a senior Hong Kong-based banker at Nomura, posted on social media that he was visiting China’s western Qinghai province.

He wrote that he would “always be on the road, always have bottom lines, and always cherish truth, kindness and love”.

However, Wang, chair of investment banking for China at the Hong Kong arm of the Japanese bank, cannot now return to Hong Kong.

He has been banned from leaving mainland China, a move connected to the investigation into tech dealmaker Bao Fan, said people familiar with the matter. Relatively few details are available, though the people said he was not in detention.

Still, the restrictions on a veteran banker working for an international firm might worry Chinese bankers based outside the mainland, some of whom travel in and out regularly, and the global institutions that employ them.

Wang worked on Wall Street in the 1990s, then moved to Hong Kong in 1996 where he worked at Merrill Lynch and Deutsche Bank. He had a stint in Beijing at Zhong De Securities, a joint venture between Deutsche Bank and a domestic company, Shanxi Securities.

Two people with knowledge of the matter said the exit ban was related to Wang’s time at state-run bank ICBC International, where he worked between 2011 and 2016, according to his LinkedIn profile.

There, he overlapped with Cong Lin, a former ICBC and China Renaissance executive who was summoned by China’s securities regulator a year ago, after which he left senior positions at China Renaissance’s securities unit and was detained. Cong played an important role in a partnership between ICBC and China Renaissance.

Meanwhile Bao, the founder of China Renaissance who for years played a central role in financing Chinese tech, hasn’t been seen since the company said in February that he was “co-operating in an investigation”.

Job moves

• Jennifer Zuccarelli, head of communications for JPMorgan Chase’s wealth management unit, has joined Goldman Sachs as global head of media relations, people familiar with the matter told DD.

• KKR has named former WeWork chief financial officer Kimberly Ross to its board of directors.

• Raisin has appointed former UBS chair and Bundesbank president Axel Weber to its advisory board.

• Airbus chief executive Guillaume Faury will relinquish his role as head of the planemaking business to Christian Scherer, current group chief commercial officer, said two people briefed on the situation.

• Krispy Kreme, the doughnut chain backed by JAB Holdings, has named its chief operating officer Josh Charlesworth as president and chief executive, succeeding Michael Tattersfield, who will become a senior adviser.

• Golub Capital has hired Lazard Asset Management’s former director of offshore wealth Karim Salazar Antoni as a director based in Miami.

Smart reads

Megayacht money pits As western authorities seize the vessels and mansions of sanctioned Russian oligarchs, cash-strapped island nations have been left footing the bill, The Wall Street Journal reports.

Five-star assets Raffles London, the lavish hotel once home to Winston Churchill’s office, underscores a new era of inflation-resistant super-luxury hospitality as foreign investors snap up trophy assets, writes the FT’s travel editor Tom Robbins.

Honest dialogue Société Générale’s investor day may have flopped but such events bring some much-needed strategic focus and transparency to Europe’s banks, writes the FT’s Patrick Jenkins.

News round-up

Amazon to invest up to $4bn in AI start-up Anthropic (FT)

Nato’s €1bn venture fund offers defence start-ups an alternative to China (FT)

Private equity firms pivot away from traditional buyouts (FT)

Chinese government probe casts new doubt over Evergrande restructuring (FT)

Vivendi’s Canal+ attacks French football body over rights

Asset manager DWS to pay $25mn to settle SEC probes (FT)