Citigroup delivered fourth-quarter results on Tuesday that suggest CEO Jane Fraser's aggressive restructuring campaign is finally bearing fruit. The bank posted adjusted earnings of $1.81 per share, comfortably exceeding the $1.71 analyst consensus, as investment banking revenues surged 35% on the back of an 84% explosion in merger and acquisition advisory fees.
The Turnaround Takes Shape
For Fraser, who took the helm in March 2021 as Citigroup's first female CEO, the results represent vindication of a strategy that has been as painful as it has been necessary. The bank has eliminated over 20,000 positions—nearly 8% of its global workforce—and flattened its organizational structure from 13 management layers to just eight. More than 60 internal committees have been dissolved in what Fraser has termed a "ruthless simplification" of the sprawling institution.
"With record revenues and improved efficiency, we are demonstrating that our strategy is working."
— Jane Fraser, Citigroup Chair and CEO
The restructuring has exacted a toll: the fourth quarter included $612 million in severance expenses related to ongoing workforce reductions. But the investment is beginning to generate returns. Citigroup's adjusted return on tangible common equity reached 9.7% in late 2025, approaching the 11% target Fraser has set for 2026.
Investment Banking: The Star Performer
The standout story of Citigroup's quarter was investment banking, where a resurgent M&A market powered exceptional results. Advisory fees for mergers and acquisitions surged 84% year-over-year, reflecting both improved market conditions and the bank's enhanced competitive position following years of investment in its advisory franchise.
The 35% overall increase in investment banking revenue to $1.29 billion positions Citigroup favorably as the dealmaking cycle accelerates. After several years of subdued M&A activity due to economic uncertainty and elevated interest rates, 2026 is widely expected to bring a revival in corporate transactions—and Citigroup appears well-positioned to capture its share.
The Mixed Signals
Not all the numbers were positive. Revenue of $19.87 billion missed analyst expectations of $21.13 billion, and reported net income of $2.5 billion included a $1.2 billion loss related to the held-for-sale accounting treatment of Citigroup's Russian operations. The bank has been working to exit Russia since the country's invasion of Ukraine, a process complicated by Russian regulatory requirements and finding an acceptable buyer.
Net interest income rose 14% to $15.67 billion—roughly $815 million above expectations—providing a solid foundation beneath the more volatile investment banking results. The improvement reflected both higher interest rates and the bank's success in defending its deposit franchise against competition from money market funds and high-yield savings accounts.
The Fraser Strategy: Complexity as the Enemy
Understanding Citigroup's turnaround requires appreciating the scale of the problem Fraser inherited. The bank had grown into one of the world's most complex financial institutions, operating in over 160 countries with a bewildering array of business lines, legal entities, and reporting structures. This complexity created inefficiencies, regulatory challenges, and strategic confusion.
Fraser's response has been to radically simplify. The bank has exited consumer banking operations in 14 markets, including Australia, India, and Mexico, while doubling down on its core strengths in institutional services, wealth management, and U.S. consumer banking. The organizational flattening has accelerated decision-making and reduced overhead, while the headcount reductions have generated billions in run-rate savings.
The Human Cost
The transformation has not been painless. The elimination of 20,000 jobs by the end of 2026 represents one of the largest workforce reductions in American banking history, creating anxiety among employees and criticism from labor advocates. Fraser has defended the cuts as necessary to create a more competitive institution, arguing that a stronger Citigroup will ultimately provide more stable employment for the workers who remain.
What's Next: The 2026 Outlook
Looking ahead, Citigroup faces both opportunities and challenges. The anticipated revival in M&A activity could provide continued tailwinds for investment banking, while the simplified organizational structure should enable more agile responses to market opportunities. The bank's exposure to U.S. banking deregulation under the Trump administration could also prove beneficial, potentially easing capital requirements and expanding permissible activities.
However, risks remain. The bank continues to navigate regulatory scrutiny following a 2020 consent order related to risk management deficiencies—an overhang that Fraser has made addressing a priority. Consumer credit quality bears watching as household debt levels rise and some lower-income borrowers show signs of strain. And the Russia exit remains incomplete, with additional losses possible depending on the eventual sale terms.
The Investment Case
For investors, Citigroup presents an intriguing value proposition. The stock trades at a significant discount to book value, reflecting years of underperformance relative to peers like JPMorgan Chase and Bank of America. If Fraser's turnaround continues to gain traction, that valuation gap could narrow substantially.
Wells Fargo analyst Mike Mayo has called Citigroup his top pick among bank stocks, citing the combination of operational improvement and undemanding valuation. The risk, of course, is that the turnaround stalls—or that external factors like a recession or credit crisis overwhelm the operational progress.
For now, Tuesday's results suggest that Fraser's "ruthless simplification" is working. The question is whether Citigroup can sustain the momentum through what promises to be a complex and uncertain 2026.
