Citigroup’s hire of Viswas Raghavan from JP Morgan to be its head of banking in February 2024 was seen across the industry as a coup.
Raghavan is arguably the most successful investment banker of his generation, who had helped propel JP Morgan to the top of league tables and cement its position as the dominant all-round player in the market.
Citi’s CEO Jane Fraser was straining to enliven the bank’s lacklustre performance in corporate and investment banking, using consultants to restructure the division. Market participants were gossiping about why it was taking Citi so long to appoint a head of banking to lead the drive. Prising a universally acknowledged winner out of the hands of its biggest rival was hailed as a master stroke.
When Citi astonished the market by securing Raghavan, he was also made an executive vice-chair, interpreted as a sign that he was a potential candidate to succeed Fraser.
The Financial Times’ report on Wednesday that JP Morgan had in fact told Raghavan on a Friday that he “had no long-term future at the group”, prompting him to do a deal with Citi over the weekend, upsets that narrative.
JP Morgan’s recently promoted co-heads of corporate and investment bank, Jennifer Piepszak and Troy Rohrbaugh, decided Raghavan could not stay because his tough and sometimes “offensive” management style had repeatedly upset colleagues, leading some to leave, the FT reported.
Senior bankers Fernando Rivas and Jim Casey had at different times in the previous four years raised concerns about Raghavan with Jamie Dimon, JP Morgan’s CEO. One year, the bank reduced Raghavan’s pay because of his behaviour.
GlobalCapital does not comment on the truth or otherwise of the allegations about Raghavan’s behaviour at JP Morgan. Asked about them by GlobalCapital, JP Morgan declined to comment.
According to the FT, Raghavan bypassed the headhunters Citi was using and negotiated his hire directly with Jane Fraser over the weekend of February 24-25, and the appointment was announced on Monday February 26.
Sources had told GlobalCapital the same thing — Citigroup rejected this account of how the hire was made when asked about it by GlobalCapital last June.
Asked about this and the issues surrounding Raghavan's hire this week, Citi told GlobalCapital: “The process for how Vis joined Citi has been mischaracterized… It began in January 2024, lasted more than a month and included internal and external diligence as well as direct participation from Citi’s senior leadership and board of directors.”
The bank also called the FT's allegations about Raghavan's behaviour "frivolous, tabloid coverage that's filled with falsities and built on anonymous smears. Vis is a proven leader with a well-earned track record for driving results. We're thrilled to have him as a member of Citi's executive management team and proud of the business he is building here."
Citi has not commented specifically on the report that Raghavan had been told he had no long term future at JP Morgan.
Asked by GlobalCapital whether it knew this when it hired him, Citi did not answer.
Mixed reactions
Responses to the news have been varied. Many in capital markets admire Raghavan, and while he is known to demand high performance and use strong language when he is unsatisfied, some take the view that this goes with the territory in investment banking and is justified by the results he has achieved.
In the first quarter of this year Citi’s banking division made $304m of net income, up 36% on the same quarter a year ago. Return on equity was 15.8%, up from 9.8%.
Other observers are dismayed that intimidating management styles are still so widespread in investment banking — and so widely tolerated.
Some are shocked that a hire Citi presented as a victory may have been a convenient escape route for an executive who was going no further at the firm where he had made his career.
Citi on the spot
The allegations about Raghavan’s behaviour at JP Morgan are not so grave that they pose a direct problem Citi must deal with now.
But the bank will face questions. Did Raghavan tell Citi JP Morgan had pointed him towards the exit? Did Citi know this by other means before it hired him? Did it need to pay Raghavan $52m to secure him, as the FT reported? How detailed was its due diligence into his track record?
Citi’s shareholders and employees would be justified in demanding to know.
The news comes at a bad time for Citi, when it is facing lawsuits from women alleging they were forced out of the bank by sexist and sexually harassing behaviour by male managers, and that Citi’s human resources staff protected the abusers instead of the victims.
Citi is standing by Andy Sieg, its head of wealth, who is at the centre of a lawsuit brought by former employee Julia Carreon.
Citi is contesting the lawsuits. Asked by GlobalCapital about these issues, Citi declined to comment.
Banking’s disease
People can change their habits. There are plenty of examples of bankers whose harsh management has prompted criticism or reprimands getting their act together and adapting to more modern and respectful ways of working.
Raghavan may be managing in an exemplary way at Citi, and most in the markets would wish him good luck if he does.
But this episode brings home two truths about modern investment banking.
One is that aggressive, rude or belittling behaviour, in the name of maximising profits, is no longer acceptable.
Investment banking is a tough industry, and will remain intensely competitive. The difference between winning a deal and missing out is stark, and banks will continue to demand hard work and urge bankers to push for goals.
But that is no excuse for making people unhappy or excessively stressed at work.
The best leaders show by example how to do well. They reward success but also try to help and support those who need it, and make everyone in the team feel valued.
This should be just as true in investment banking as in any other endeavour.
Unfortunately, the truth falls far short of that standard. The investment banking industry has long had a particular problem of toxic behaviour, particularly towards women, and although it has improved, it is not doing so fast enough.
Getting a grip
The second truth is that in this high pressure, fast-paced business, governance is everything.
Like all investment banks, Citi and JP Morgan have faced multiple complaints from staff over the years, about management behaviour or decisions of one kind or another.
When the rewards, responsibilities and risks are so high, a degree of friction is inevitable.
The crucial issue is how banks deal with these.
Raghavan’s behaviour caused problems at JP Morgan, but also produced results it valued.
The bank weighed those imperatives. It may or may not have made the right calls at different times — in Raghavan’s case, and in others.
But at least, in this case, executives were able to raise concerns with Dimon, and in the end Piepszak and Rohrbaugh took a decisive step.
Citi’s governance is under the spotlight now, because of multiple allegations of bad management and sexism.
Like all investment banks — none is perfect — Citi needs to show it has control of its internal culture.
Allegations of wrongdoing need to be investigated swiftly and fairly. Employees of both sexes and all races need to feel they are listened to and treated equally — that the system promotes justice.
But implementing good governance is not just about preserving the status quo and protecting the bank from risk.
At all banks, governance has to actively move the firm and its managers towards more enlightened and humane forms of leadership. That includes disciplining wrongdoers and setting clear standards for all.
Everyone knows the times are changing. But progress will only come if firms, individuals — and above all, managers — make them change. The best form of strength is admitting your weaknesses.
Additional reporting by David Rothnie