Citi’s risky gamble with demotions and salary hike caps
With the year winding down, banks are gearing up to chart fresh goals and objectives for the future. But first, they must face the tricky task of reviewing the current year’s performance — complete with the heated debates over promotions and bonuses. It’s a messy, high-stakes conversation that’s far from anything straightforward.
Even more reason to celebrate this Christmas: After a two-year drought, where high interest rates stifled dealmaking and squeezed fees for investment banks and money managers, activity levels are now recovering. Last month, pay consultancy Johnson Associates shared insights that Wall Street bonuses are set to jump by as much as 35% this year, fueled by a rebound in corporate deals, stock sales, and debt transactions in 2024. Investment bankers working on debt transactions stand to benefit the most, with expected increases ranging from 25% to 35%. This is particularly promising for Goldman Sachs’ investment banking division.
The mood surrounding M&A, dealmaking, and investment banking has also turned largely positive with Trump’s return to the political scene. Under his previous administration, banks were more active in stock buybacks, which boosted stock prices by shrinking the number of outstanding shares. Moreover, Trump’s strong pro-deregulation stance and more relaxed approach to antitrust enforcement could pave the way for a surge in mergers and acquisitions, offering banks greater opportunities to profit from both direct deals and a higher volume of transactions.
Not so fast there: However, not all members of Wall Street institutions may find a pot of gold at the end of the rainbow. Citi, for example, is moving in the opposite direction, opting for a more conservative strategy in handling year-end bonuses, raises, and promotions.
Remember when I covered Citibank’s bold step last year, launching a cost-cutting campaign that included its largest-ever layoffs and an overhaul led by CEO Jane Fraser? Dubbed Project Bora Bora, the plan was supposed to conclude by March 2024. Although it’s likely not over yet and it’s unclear where things stand internally, the aftermath is still reverberating, now manifesting as reductions in salary hikes and employee demotions.
Retention, engagement, and access — keys to better reward programs
Loyalty programs have evolved into a fundamental aspect of consumer culture, widely regarded as critical for fostering customer loyalty. However, questions remain: How effective are these programs in retaining customers, how do different generations interact with them, and how accessible are they to the average consumer?
I spoke with Shikha Narula, Bank of America’s Head of Rewards, to explore these topics and how Bank of America’s Preferred Rewards program, now a decade old, measures and evaluates its performance in these areas.
Shikha Narula, head of rewards at Bank of America
Q: How does Bank of America ensure that all members feel valued and engaged in the Preferred Rewards program regardless of their tier?
On a late summer morning in New York City, industry leaders gathered at Mastercard’s Innovation Hub for Tearsheet’s flagship The Big Bank Theory Conference 2024. The event this year was dedicated to exploring the future of small business support in the financial sector. Attendees, ranging from fintech startups to established banking incumbents, anticipated insights from some of the most influential voices in the field.
Setting the Stage: The Global Impact of Small Businesses
Kicking the day off was Salah Goss, Senior Vice President for Social Impact at MasterCard’s Center for Inclusive Growth. Goss began by painting a vivid picture of the small business landscape worldwide.
Salah Goss, Senior Vice President for Social Impact, MasterCard
“Imagine a world without small businesses,” Goss challenged the audience. “It’s almost impossible, isn’t it? That’s because small businesses make up 90% of businesses and 50% of employment worldwide. In the US alone, they account for 50% of the GDP.”
Goss went on to introduce MasterCard’s “Strive” program, a global initiative designed to support small businesses through three key pillars:
Access to credit
Access to digital tools and digitization
Access to networks and know-how
She shared an inspiring success story that brought these pillars to life. “Let me tell you about Brian,” Goss said. “She’s an urban farmer in Watts, a community in LA, where we support an organization called Think Watts. Through our digital payment tools and analytics, She could suddenly see which plants her local farmers’ market preferred – indoor houseplants or outdoor flowers. Brian’s sales skyrocketed by 70%. That’s the power of digitization for small businesses.”
Goss continued, “In Strive USA alone, we’ve already helped partners unlock about $44.2 billion in affordable credit to small businesses. But we’re not stopping there.”
Beyond the goods and services SMBs offer they often also function as community hubs. Critically, SMBs provide jobs and fuel for their local economic engines; just under half of private sector employees are employed by one of the 34,000,000-plus SMBs in the US.
While every business is unique, there are some common challenges— concerns around tracking, forecasting, and understanding cashflow, for example. Time is another: SMB owners and managers wear so many hats, from selling a product or service to often serving as a one-person HR department.
“Running a small business is hard and owners are looking for help. Frequently, they’re turning to the partners they already trust, like their banks, to help solve these pain points. As our co-founder and CPO, Tomer London, likes to say, ‘There’s never been a better time to build tools for SMBs.’ Banks have an incredible opportunity to do just that,” said Yi Liu, General Manager of Gusto Embedded.
The Art of Partnership: A Banker’s Perspective
Mark Valentino, President of Business Banking at Citizens Bank took the stage, dressed in what he jokingly referred to as his “banker’s uniform.”
Mark Valentino, President of Business Banking, Citizens Bank
“I was told to give a TED-style talk,” he quipped, “but I don’t own any turtlenecks, so you’ll have to settle for this suit.” The room broke out in laughter, creating a warm atmosphere for his insights on the importance of partnerships and integration in small business banking.
He outlined three key principles, emphasizing the importance of understanding small business needs. “We call it the guiding North Star,” he explained.
Truly understanding the needs of small businesses. Are you solving the right problems? “Because let me tell you, we’ve all been guilty of rolling out great ideas that solved the wrong problem.” Valentino emphasized that it is critical to identify customers’ pain points accurately, and not just roll out great ideas that don’t address their actual needs.
Integration and creating seamless, frictionless experiences for customers. He discussed the importance of integrating solutions within the Citizens ecosystem so customers don’t have to juggle multiple applications. “Everything we’re doing at Citizens is about integration. We want [our business customers] to live in there and be able to do everything, whether it’s their payroll, payments, or their invoicing needs. We want them to be able to interact with their customers and their vendors all in one sign on,” he said.
Fostering a culture of growth, not just for Citizens’ own profitability, but for helping small business customers grow and succeed. He gave examples of partnerships like Mastercard Digital Doors, which offers marketing and financial tools to small businesses, and Luminary, a gender inclusive, global professional education and networking platform created to address the systemic challenges impacting women and our allies across all industries and sectors.
The banker painted a vivid picture of the typical small business owner’s challenges. “Picture this,” he said, gesturing to the audience. “An electrical contractor in Boston, a minority-owned consulting firm in New Jersey, and a veteran-owned orthopedic treatment center in New Hampshire. What do they have in common? They’re all going up against larger competitors, struggling to hire and retain employees, and they’re all super stressed out. They’re short on time and long on problems.”
To aid SMBs get things done fast one way is to consolidate tools. “Time-strapped SMB owners increasingly seek integrated solutions to solve their business’s needs. That’s why there is traction among banks looking to offer additional value-added services to their SMB customers, whether payroll, point-of-sale solutions, or invoicing services,” said Liu.
The Digital Revolution in SMB Payments
As the event progressed, Chris Ward, head of enterprise payments at Truist, took the stage to discuss the evolving world of small business payments. Ward introduced what he called the “3S’s of the economy”: Simplicity, Speed, and Safety.
“Think about the last time you ordered something on Amazon,” Ward challenged the audience. “Did you need someone to come to your house and teach you how to do it? Of course not! That’s the level of simplicity we need to strive for in financial services.”
Chris Ward, Head of Enterprise Payments, Truist
Ward delved into the persistent use of checks in small business transactions. “You’d think after the pandemic, everyone would have abandoned checks,” he mused. “But here’s the kicker – check volume in B2B transactions is still growing!”
This revelation led to a fascinating discussion on fraud risks associated with checks. Ward shared an anecdote about his daughter, who also works in the payments industry. “She’s always joking with me about her smaller customers,” Ward chuckled. “I can’t believe these customers don’t use Positive Pay,’ she says. It’s a family affair in payments, folks!”
Cash is still king for SMBs
Scott Beyer, Head of Business Banking Digital Experience at US Bank, presented on the changing payment and cash flow needs of small and mid-sized businesses (SMBs). He highlighted how these needs are driving SMBs to adopt new technologies, and how financial institutions (FIs) can simplify the complex ecosystems SMBs operate in.
Scott Beyer, Head of Business Banking Digital Experience, US Bank
He discussed findings from a recent US Bank survey, which revealed that 87% of small businesses remain optimistic about their future, despite challenges such as inflation and talent shortages. Small business owners are eager to adopt technology that helps streamline operations, but they seek solutions that save time and allow them to focus on running their businesses rather than managing financial processes.
Beyer identified three critical areas for FIs to focus on:
Availability of Digital Products: Ensure banking products are easily accessible and digitally available, enhancing convenience for small business customers. Integration of Services: Build seamless internal and external integrations to simplify business banking, payments, and other operations for clients. Data Harmonization: Align and consolidate fragmented data to deliver personalized insights and streamline financial management for small businesses.
Beyer concluded by urging banks to prioritize investment in infrastructure and data integration to create a more connected banking, payments, and software ecosystem that better serves SMBs.
When conceptualizing what their software ecosystem is going to offer to their SMB clients, banks need to consider the biggest pain points for these customers. “Running payroll for 300k+ SMBs has taught us a few lessons about SMB cashflow. Many customers tell us payroll is their largest regular expense. And meeting payroll each week — will they have the funds, will payments from customers clear in time, do they need to access a line of credit — can be a source of stress. However, banks also have visibility into the revenue side of an SMB business and are in a unique position to offer payment options and digital tools that help SMBs better understand, manage, and forecast their end-to-end cashflow,” said Liu.
Embracing the Future: AI and Beyond
The event included a look toward the future with a discussion on emerging technologies. Goss shared MasterCard’s latest innovation – an AI-driven chatbot for small businesses.
“But here’s what makes it special,” Goss explained. “It’s inclusive. When business owners from underrepresented communities ask a question, the response reflects their unique experiences and needs. It’s not just a chatbot; it’s a digital ally that truly understands them.”
After the day’s speakers and three closed-door working groups exploring SMB issues in depth, it was time for networking before calling it a day. This year’s The Big Bank Theory was a catalyst for change, intimating a new era of empowerment for small businesses in the digital age. As one attendee was overheard saying, “This isn’t the end of the conversation. It’s just the beginning.”
The complexity of navigating financial markets under a Trump presidency
The 2024 US Presidential Election has been the talk of the town throughout the year, with anticipation building over whether the Democrats or Republicans would claim victory. With results now in, Donald Trump has returned as the 47th President of the United States.
Reactions to his win are a mix of the expected and the unexpected, though the public response has shifted considerably from when Trump first took office in 2017 — this time, it’s less of a shock.
Trump’s agenda during his term includes bold promises such as tax cuts, energy policies, cost reductions, increased tariffs, greater openness toward cryptocurrency, deportation of illegal immigrants, and a more lenient regulatory stance toward banks. Whether these quick-fire decisions will stand the test of time, or if they will prove to be short-sighted in the face of evolving global challenges is a topic for another conversation.
With the leader now chosen, it’s time to face the bigger question: what impact will Trump’s victory have on the nation, the economy, and the banking sector?
While there’s plenty of talk around this topic, we narrow in on the core cause-and-effect dynamics that could unfold in the banking sector.
Shifting the focus from TikTok’s sketchy financial advice to savvy tips
I’m still hoping for the day I play Solitaire Cash and actually make some real (small though) money from it!
For ages, get-rich-quick tactics have successfully tempted people with promises of quick cash, playing on the universal desire for easy money. But now, the digital boom has supercharged these tactics, creating a surge in clickbait methods to tap into people’s financial hopes and vulnerabilities.
These digital spaces are also home to the largest generation, Gen Z, who feel most comfortable in the online world for any and everything. This generation prefers bite-sized videos, influencer tips, and meme-based content on platforms like Facebook, Instagram, Twitter, Snapchat, and TikTok. These channels aren’t only their entertainment spaces but also their go-to sources for navigating banking and financial decisions, where traditional banking methods often feel out of touch.
Financial leaders and bank executives view the financial advice flooding these platforms as “reckless” and far removed from conventional wisdom, worrying that it’s undermining the financial literacy of younger audiences. Many Gen Zers, still grappling with the basics of budgeting, are being swayed by flashy, often misleading content that could shape their financial habits in ways that don’t align with long-established principles.
“Kids and teens are not going to sit down and read a personal finance book. And it can be really difficult to discern missing information across social media,” Matt Wolf, SVP of business development at Greenlight said in a Tearsheet Podcast episode.
Sift through the noise
While it’s easy to be skeptical of the financial advice and information shared by non-experts on social media, it’s important to remember that there are two sides to the story. Among the noise, some influencers drawing on years of personal experience, focus on educating their audience about the fundamentals: offering mindful guidance instead of rushing into risky financial moves or promoting instant impulsive solutions.
It’s the way they package the advice that distinguishes them from traditional institutional wisdom. This places them in a distinct category of financial information providers — straddling the line between conventional advice and clickbait-driven influencers.
Following a TikTok account for financial tips is all about honing the ability to cut through the misleading voices and identify the ones that can bring real value amid a sea of misinformation.
Today, we look at one of the more grounded voices in the TikTok financial space and discuss why her content may make practical sense for those looking to improve their financial journey — especially women (my inner feminist just made an appearance!).
Mental wellness, physical health, and work-life balance — where do these sit on banks’ priority ladder for their employees?
Reports of sudden, unexpected deaths among young individuals have been making headlines across the country, with One Direction’s Liam Payne being the latest to draw public attention. Amid speculation around the causes, a recent case within the financial industry — linked to insane work hours — has particularly unsettled the entire sector.
1. Mental Wellness: How banks might find it hard to turn a blind eye
Leo Lukenas III, an investment banker at Bank of America, passed away in May this year. He began his career at the bank in 2023 after serving ten years in Army Special Operations.
While Lukenas’s heart blood clot was the cause of his death, equal focus is being placed on the fact that he died shortly after working on a $2 billion deal, allegedly after enduring 100-hour workweeks. This has sparked heated debates about the grueling hours and high-stress levels within the industry, particularly in investment banking, where last-minute project deadlines from senior managers often force junior bankers to give up their weekends.
Similar narratives have surfaced regarding other Wall Street banks, with Goldman Sachs being one example, indicating that such conditions are considered routine within these big firms.
The stance of legacy banks: Amid the seriousness of these increasing occurrences and the growing awareness of mental health, banks now face pressure to prioritize employee mental health on par with traditional physical health benefits.
Months after the incident, J.P. Morgan Chase established a new executive role in September to monitor early-career bankers and analysts, aiming to address the issues of long hours and high-performance expectations.
Ryland McClendon has been appointed as the global investment banking associate and analyst leader, focusing on the well-being of junior staff. With 14 years at JPM, McClendon has held various positions related to talent development, diversity, equity, inclusion, and campus recruiting. Based in New York City, she will oversee the implementation of a nationwide new policy capping junior employees’ workweeks at 80 hours, particularly within the investment banking division.
While junior bankers are becoming more outspoken in their calls for a work-life balance, this isn’t the first instance where the banking industry and its workforce are at a crossroads in finding a middle ground on matters like these.
The room for automation in the financial services industry is huge and research by Citi finds that 54% of jobs in the banking industry could be impacted by Gen AI.
Within financial services, consultative services like wealth management and mortgage brokering may be the most vulnerable to disruption by Gen AI, says Matt Britton, CEO and founder of Suzy, a market research firm.
“When you talk about the financial services – particularly the services aspect – anything that’s consultative, that’s the first place AI is going to go. Mortgage brokers, wealth managers, accountants, those are areas AI is just built to be able to disrupt,” he said on a recent Tearsheet podcast.
One major reason for this is the expense that comes with hiring human expertise in these areas, according to Britton.
“[Employees are] so expensive, especially for SMBs, and 99% of the things that they do are highly templatized. Sure, there are going to be that 1% of cases where, if someone’s selling their company, they wouldn’t want an AI lawyer. But 99% of SMB-owners are going to seek AI-driven services because it’s just cheaper, faster, and more efficient.”
Gen AI’s entry into these services is already well underway:
Tax Management: Intuit’s Gen AI financial assistant integrates across its product line, including QuickBooks and TurboTax to help customers file their taxes easily and comprehensively.
Accountancy: Fintech Lili recently deployed a Gen AI tool called Accountant AI that will help its SMB customers with finding out answers to common accounting-related questions, as well as other tasks like budgeting.
Insurance: Lemonade has created bots that create custom policies and help with claims processing.
Investing: Public’s Gen AI powered assistant Alpha provides market trends, answers questions, and assists its users to do investment research. It’s set to become a major part of the firm’s strategy for the future, according to its CEO, Leif Abraham: “Currently Alpha, our AI assistant, is solely used to provide insights into the markets, public companies, and other assets. In the future, Alpha will expand to help people manage their portfolio. Moving Alpha from an assistant that gives context and information, to an assistant that can take action. This next phase is about integrating Alpha into that experience.”
Traditional FIs, on the other hand, have yet to take on a Gen AI strategy that centers around customer-facing products. And while most banks are steering clear of using AI assistants powered by Gen AI, they are more open to using it in the back office to help make their current employees and teams more productive.
Banks are using Gen AI to boost productivity
In July, JPMC introduced a new Gen AI powered tool to its Asset & Wealth Management team which the bank said could perform the tasks of a typical research analyst. The bank is gradually exposing more and more of its workforce to the tool, and an internal memo shows it’s encouraging its employees to use the tool for tasks like “writing, generating ideas, solving problems using Excel, [and] summarizing documents.”
Morgan Stanley has also launched its AI tool called Morgan Stanley Debrief, which helps financial advisors with creating notes on a meeting with a client.
Using Gen AI to increase productivity rather than build new products is a quintessential bank move. But apart from the obvious reasons like regulations and uncertainty, there may be another reason why banks are not moving faster with deploying Gen AI in client facing interactions.
Older folks aren’t keen on Gen AI
Suzy’s research shows that younger consumers are a lot more comfortable with using AI for financial planning and optimization than older consumers.
The trend repeats when consumers are asked which financial tasks like tax management, mortgage brokering, and wealth management do AI perform better than humans. Close to 60% of older consumers report feeling that AI is not better than humans at any of these tasks, according to Suzy’s research.
The fact that a majority of older consumers don’t feel comfortable with AI nor trust the ability of Gen AI-powered tools to perform well in the areas mentioned is a problem for banks. In the US, 50% of the local banking revenue is generated by people who are fifty years or older, according to data.
The challenge for banks is clear: they must navigate a delicate balancing act between meeting the needs of their current, older customer base while preparing for a future shaped by younger, tech-savvy consumers who are far more open to AI-driven solutions. To stay competitive, traditional financial institutions will need to move Gen AI to the front of the office, and find a way to collaborate with fintechs and co-create what Gen AI powered products will look like.
If you want to read more about how AI is changing the role of banks, download this guide.
What started as a growing trend last year has now become a full-blown competition, as banks — from the biggest players to smaller institutions — dive headfirst into AI investments.
However, the stakes are high. As the industry pushes for clearer standards on AI risks and controls, it concurrently faces a new challenge: turning theoretical plans and investments into measurable successes. Investors are increasingly expecting banks to translate their AI-driven strategies into real-world results and tangible returns, whether through cost savings, risk mitigation, or new revenue streams.
AI is still in its nascent phase, especially within the banking sector, and whether it’s too soon to seek returns on these foundational investments is a different conversation altogether.
Today, we delve into:
The progress banks have made on their journey toward AI maturity
Are we jumping the gun by seeking ROI from banks’ foundational AI investments at this point?
The frontrunner and the runner-up in the AI race and the factors propelling their advancements
Brief rundown
J.P. Morgan Chase (JPMC) has secured the top position in this year’s AI Index, marking its third consecutive appearance in the top 10 across all AI advancement metrics detailed in a new Evident Banking AI Index. The report focuses on four essential AI evaluation metrics: Innovation, Leadership, Transparency, and Talent.
Given Jamie Dimon’s consistent advocacy for AI and JPMC’s recent strong advancements in the space, it’s not surprising to see the firm leading the charge in the AI race. However, what stands out is that it is closely followed by Capital One, the Royal Bank of Canada, and Wells Fargo, indicating that North American banks are leading the way for the most part in exploring AI’s potential.
One of the strongest pillars contributing to North American banks’ progress is talent acquisition, particularly in AI Development and Data Engineering. US banks are increasingly solidifying their positions in this area. The three US incumbent banks — Wells Fargo, JPMC, and Capital One — account for 17.5% of the current AI talent pool, reflecting a significant 19.4% increase from last year, according to the report.
The frontrunner
I’ve been closely following JPMC’s work in AI and its initiatives from Q4 2022 onward. Building on that research, the factors that likely contributed to the bank achieving a leading position in AI advancement across multiple pillars include:
As digital banking takes off, which institution will wear the crown?
The much-anticipated Q3 earnings season has officially kicked off, with major banks taking the spotlight this week and setting the tone for what’s to come.
The headline-grabber was the resurgence of trading and investment banking among Wall Street’s banks — a clear bright spot in an otherwise challenging landscape
While the timing of the Fed’s rate cuts didn’t allow them to negatively affect banks’ third-quarter net interest incomes, optimism is also building around their future effects. The rate cuts from the Federal Reserve and other central banks along with expectations of further cuts in the coming months could pave the way for more deals as reduced borrowing costs make capital more accessible.
Snapshot: Q3 investment banking earnings of major banks
A quick overview of investment banking earnings from the six major banks shows growth trends:
Wells Fargo‘s non-interest income grew by 12%, partially driven by higher investment banking fees and strong trading revenue.
Bank of America experienced an 18% YoY increase in investment banking fees, totaling $1.4 billion, as renewed client confidence encouraged more debt and equity issuance.
Goldman Sachs saw the fees of investment banking, its signature business line, rise by 20% YoY, reaching $1.87 billion, thanks to leveraged finance, investment-grade activity, and equity underwriting. The pipeline for investment banking fees also showed improvement compared to the end of the second quarter of 2024.
J.P. Morgan recorded a 31% increase in investment banking fees.
Citigroup also shined this quarter, with a 31% rise in investment banking revenue, largely fueled by investment-grade debt issuance.
Morgan Stanley‘s investment banking revenue surged by 56% compared to the previous year, amounting to $1.46 billion. This reflects the firm’s investment banking balance with its wealth management division, a major contributor to its overall earnings. The firm’s investment management division also reported a 9% revenue increase, reaching $1.46 billion.
The 2 recurring themes: Technology and digital banking
The financial services industry has historically been male-dominated, and the entrepreneurial and startup landscapes tell a similar story — not because there are fewer women founders, but because they face fewer opportunities than men.
This doesn’t diminish the talent and capability of women entrepreneurs, whose presence in the business world continues to rise. From 2019 to 2023, the number of women-owned businesses grew at almost twice the rate of those owned by men. As of 2024, women own 39.1% of all businesses—more than 14 million—employing 12.2 million individuals and generating $2.7 trillion in revenue. Despite this progress, significant challenges persist: men still hold a larger share of business ownership, and only 7% of unicorn founders are women, according to a recent J.P. Morgan study. These figures are even starker when it comes to minority founders.
Creating a level playing field isn’t just a matter of fairness; it can be a stepping stone for sparking innovation and unlocking economic growth. Ethnically or racially diverse founders can tap into new markets and address the unmet needs that drive sustainable progress. Closing the revenue gap for diverse entrepreneurs could bring in an additional $667 billion, while bridging the gap between women and men-owned businesses could generate an additional $7.9 trillion for the economy, according to a recent research by Wells Fargo.
So, what’s holding back this change?
We know that investor confidence tends to increase when a founder fits a particular mold — whether that means the founder’s gender, ethnicity, or simply having a white male co-founder on the team. But beyond these age-old biases, how are established banks working to narrow this divide and create a more equitable environment for all entrepreneurs in today’s day and age?
“It starts with the investment in a broad national startup banking business,” Ashraf Hebela, J.P. Morgan’s Head of Startup Banking told me in our recent Tearsheet Podcast episode.
“Most of the underrepresented minorities as entrepreneurs are sitting at the early stage, and that means having to invest in an early-stage business.”
Ashraf highlighted the tangible measures financial institutions could implement to tackle this gap and something JPM has been mindful of:
