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Three years ago, as the long-struggling Citigroup was in a tailspin over a billion-dollar fat-finger error, the bank announced its next CEO, Jane Fraser. At the time, given Citi’s chronic problems, it might have looked like a classic Glass Cliff hire — the well-worn corporate strategy of putting a woman in charge just as the business is foundering.

Fraser, the first woman ever to run a Wall Street bank, inherited a behemoth that had become a laughingstock among its peers, hobbled by its unwieldy bureaucracy, a bloated staff and slim profit margins.

The fat-finger error — in which a Citi employee accidentally wired hundreds of millions more than they should have to creditors of Revlon — was the epitome of the kind of control problems that regulators had been warning the bank about for years.

But lately, to the surprise of Citi’s critics, things are looking up. Since September, when Fraser laid out her vision for a more streamlined Citigroup, the bank’s stock has shot up more than 50%.

For the first time in nearly two decades, Wall Street appears to be feeling something almost like optimism about America’s third-largest bank. Its stock has outperformed rivals JPMorgan Chase and Bank of America so far this year, and it is expected to report 5% earnings growth for the second quarter this Friday.

The bank’s finances are greatly improved, but even the most bullish Citi analysts say Fraser has a long way to go to get the bank’s financial house in order.

“The year 2024 is Jane Fraser’s midterm exam,” said Mike Mayo, senior banking analyst at Wells Fargo. If the subject is architecture, she gets an A-plus for her plan. But, he said, “she gets a grade of B to C for the execution, and she gets a grade of D for the financial results.”

Mayo has a long and rocky history with Citi, a bank that he has relentlessly criticized for its management missteps and aggressive accounting practices. But speaking of Fraser’s tenure, Mayo sounded unusually sanguine about her progress in simplifying Citi’s notoriously labyrinthine corporate structure. He even expects the stock price to double in the next three years.

“It’s not the same arrogant Citigroup of the past half-century,” he tells me. “They finished a watershed org simplification in seven months … and this involved 200,000 employees.”

On an earnings call this spring, Fraser herself touted the reorg as “the most consequential set of changes” to Citi’s internal structure, which has already made the bank nimbler and more transparent.

Still, Mayo said the bank offers the “worst-in-class efficiency, returns and stock market valuation.”

“I think she will pull it off. But I’m also cognizant that as good of an architect as she is, it’s yet to be determined if she can build it,” Mayo said.

Of course, Fraser, who took over in March 2021, is still being haunted by the sins of Citi’s past. On Wednesday, the bank was hit with a $136 million fine from federal regulators, who said the bank has made “insufficient progress” in fixing problems with data management and risk controls.

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