Frustration has been building within parts of Citigroup over delayed bonuses and tight budgets, two impacts of the bank’s response to its regulatory oversight, according to people with direct knowledge of the situation.

Workers from junior salespeople to senior executives have been ensnared in monthslong reviews stemming from an anonymous complaint portal for employees, according to the sources. The bank freezes bonuses and performance reviews for staff under investigation, even if claims are baseless, according to the people, who asked for anonymity out of fear of reprisals.

The cumbersome internal reviews are a surprising fact of life at Citigroup, where CEO Jane Fraser has garnered headlines for talking about work-life balance and other ways to get a recruiting edge versus competitors. They illustrate how regulatory scrutiny has weighed on employee morale, making the already-difficult task of turning around Citigroup even harder as Fraser, 54, approaches her one-year anniversary leading the firm.

Fraser, the first female chief of a major U.S. bank, finds herself in a tricky balancing act: To overhaul a company that has deeply underperformed U.S. rivals for years, she has to improve returns and grow businesses while keeping a lid on expenses and plowing money into appeasing regulators.

Investors have been skeptical so far. While 2021 was the best year for the banking industry in more than two decades because of rising interest rates, Citigroup didn’t participate in the rally. Since Fraser took over in March 2021, the bank’s stock has climbed 2.7%, while Bank of America jumped 38% and Wells Fargo, also a turnaround project, jumped 56% in that period.

Fraser, a former McKinsey partner who took over after predecessor Mike Corbat accelerated his retirement timeline, kicked off her tenure with a bang: In April, she announced that the bank was exiting 13 markets in Asia and Europe. The strategy was to simplify the bank and focus on its strengths in global corporate cash management and U.S. credit cards, and to grow in wealth management.

The exits, including the announcement last month that Citigroup was leaving retail banking in Mexico, were applauded by analysts, who saw it as a sign that Fraser would leave no stone unturned in her quest to remake Citigroup. After all, her predecessors had resisted calls to shrink the bank’s global footprint, and Fraser herself had managed some of the operations being pruned.

But while rival banks saw their stocks surge last year and fintech players like Block‘s Cash App gained millions of users, Citigroup struggled. The company’s revenues sagged 5% to $71.9 billion in 2021 while expenses jumped 9% to $48 billion – a dynamic analysts call “negative operating leverage” and the exact opposite of what banks typically aim to accomplish.

Part of the leap in expenses came from addressing its consent orders. Regulators hit the bank with a $400 million fine and a pair of consent orders in late 2020, demanding sweeping improvements to risk management and controls after the bank accidentally wired $900 million to Revlon creditors. One of the edicts in the orders was for Citigroup to enhance the way it tracks and addresses employee complaints.

“Executing on the plan while working on the consent order, that’s the hard part,” said Glenn Schorr, banking analyst at Evercore. “Every business they’re in is uber competitive, every one of them has neobanks and fintechs and other banks and private credit managers all nipping on their heels. It’s hard to execute on all those fronts at the same time.”

Making matters worse, large investor ValueAct, which had played a role in accelerating Corbat’s decision to leave, seemed to lose conviction in its wager, trimming its position over the course of the year. Then, in December, the bank revealed that it would pause share buybacks for months to boost capital for international standards, the only major U.S. bank to do so.

Citigroup’s low stock price means it is the only bank among the six biggest U.S. institutions that trades for below its tangible book value, a key metric in the banking world that essentially means that the bank is seen as destroying shareholder value rather than creating it. Rivals JPMorgan Chase and Bank of America trade at more than twice their tangible book value.

The developments last year, including a tone-deaf compensation plan that critics say rewards executives for merely doing their jobs, prompted bank analyst Mike Mayo to pen a scathing report in October titled “Will Citi Reach Book Value in our Lifetime?”

“Coming into this year, Citigroup was the most-hated bank stock by a wide margin,” said Mayo, who admitted in a phone interview that he’d been “long and wrong” on the company after naming it a buy. “Hopefully I won’t be on my deathbed and still waiting for Citi to get to book value.”

In response to this article, Citigroup spokeswoman Jennifer Lowney had this statement:

“We believe our stakeholders understand there aren’t any quick fixes and want to see us create real value over time,” Lowney said in an email. “We’re proud of the early progress we’ve made, and are committed to putting in the hard work needed to get the right results.”

Many of Fraser’s challenges stem from structural disadvantages she inherited from Citigroup’s genesis as the original megabank two decades ago.

The bank owes its current design to former CEO and Chairman Sandy Weill, who led Citicorp into a merger with Travelers in 1998 to create the world’s biggest financial services company. His vision: a financial supermarket that spanned the globe, cobbled together though countless acquisitions.

The three men who succeeded Weill over the next two decades at Citigroup — Chuck Prince, Vikram Pandit and Mike Corbat — all struggled to make the disparate parts of the sprawling enterprise work.

A pivotal moment in the bank’s history happened during the 2008 financial crisis, when a massive reordering of the financial hierarchy resulted in winners and losers. Stronger institutions like JPMorgan swallowed the weaker ones, growing by leaps and bounds.

At first, Citigroup looked like one of the former: It had a potential deal, brokered by regulators, to acquire the retail banking operations of Wachovia, which was the fourth biggest U.S. bank by assets at the time. But it lost out to Wells Fargo, which offered to buy all of Wachovia for a far larger price.

As the crisis dragged on, Citigroup’s soured assets and risky bets forced it to take the biggest public bailout among U.S. banks. To raise money, it heavily diluted shareholders by raising new stock and sold its retail brokerage Smith Barney, with its massive army of financial advisers, to Morgan Stanley. The move would haunt Citigroup as Morgan Stanley’s focus on wealth management won plaudits from investors.

While Citigroup muddled through the decade following the crisis, it never gained the traction in U.S. retail banking that the Wachovia deal would’ve given it.

The bank has just 689 branches in the U.S., compared with well over 4,000 each for JPMorgan, Bank of America and Wells Fargo. As a result, Citigroup doesn’t soak up low-cost deposits from U.S. customers like competitors do, making its funding costs the highest among rivals.

One by one, as formerly battered banks like Bank of America and Morgan Stanley began to turn into high performers after the crisis, only Citigroup was left behind. Its stock, currently at around $66, is a far cry from its all-time high of $588.80 from August 2000.

Meanwhile, the synergies from the bank’s global sprawl after Weill acquired companies from Sao Paulo to Tokyo never materialized. Instead, overseas operations suffered from poor oversight and underinvestment, according to a former senior Citigroup executive.

“Citi missed its chance to be big in the U.S. retail market,” the former leader said. “They wasted a lot of money pursuing a global strategy, when fundamentally it’s a wholesale bank, which has lower returns than retail banking.”

The executive called the non-U.S. businesses “melting ice cubes” because as Citigroup underinvested in far-flung markets like Taiwan or Malaysia, local competitors continued to get sharper, leaving the bank further behind.

For instance, Banamex, a storied name in Mexico, was the country’s No. 2 bank when it was acquired by Citigroup for $12.5 billion in 2001. By the time Citigroup announced it was exiting retail banking in the country this year, the unit’s market share had fallen by nearly half.

Fraser has said that she’s completed her pruning of Citigroup and will present investors with a new strategic vision and multi-year plan on March 2, the bank’s first investor day in years. Analysts expect her to give medium and long-term targets for return on tangible common equity — a key industry metric calculated by dividing a bank’s earnings with its shareholders’ equity.

To win, the bank needs to break a cycle of underinvestment that leads to subpar returns.

Citigroup is picking its spots, adding 500 front office workers in its wealth business, 200 corporate and investment bankers, and working to digitize parts of its flagship corporate cash management business, CFO Mark Mason said in October.

But some managers at the retail bank claim that while the mandate is for growth, resources are limited because of the attention and money pouring into addressing the firm’s consent orders. Citigroup has dedicating more than 4,000 workers spread over six projects to the sweeping mandate to fix risk-management systems while pouring billions of dollars into technology upgrades.

That has left some frustrated that both traditional and fintech competitors have a funding advantage, giving them an edge in hyper-competitive markets. Venture capital investors poured $134 billion into fintech start-ups last year, prompting traditional players including JPMorgan to pump up their investment budget to compete.

Lacking the physical network of its peers, Citigroup has been boxed into a strategy that emphasized partnerships, which can be an efficient way to boost a bank’s reach. However, it also leaves the bank exposed to the whims of its partners: Its deal with Google to offer bank accounts to users– a move that initially had sent waves of elation through Citi – ended up nowhere after the tech giant killed the project.

Few things have frustrated employees, however, as much as the internal investigations, which can stretch for months as the bank works through a backlog of complaints lodged by its own workforce.

Complaints can be made to the internal Employee Relations portal anonymously, forcing human resources staff and lawyers to deal with a deluge of issues ranging from legitimate allegations of wrongdoing to petty disagreements or opinions on business strategy. (One person likened the complaint line to New York’s 311 service.) One of the more common complaints is tied to the bank’s Covid vaccine policy, said this person.

Another person familiar with the program said that the complaint line and bonus policy was viewed as necessary after the bank’s employees were involved in ethical failures like the Libor and foreign exchange trading scandals.

While this person said that not all complaints result in withholding bonuses, only those that cross a threshold of seriousness, others said that they’ve been instructed to withhold year-end performance reviews and compensation discussions for anyone under investigation.

Citigroup declined to say how many internal complaints it gathers or what percentage of investigations results in vindicated employees.

The policy to withhold bonuses, which began about three years ago, has tripped up employees. For senior workers, incentive compensation can make up the majority of their annual compensation. One employee had a review held up for longer than a year before ultimately getting paid. Another threatened to depart unless their case was fast-tracked.

“I asked HR, ‘Why does it take so long?'” one of the people said. “They said ‘We have so many complaints, we can’t get ahead of this.'”

The dynamic contributes to an atmosphere of second-guessing and a resistance to change, said the people. The bank also takes too long to approve new products and sometimes fails to communicate changes to key internal stakeholders before announcements are made public, the people said.

These factors may contribute to defections as competitors across finance dangle pay raises to leave Citigroup, according to the people. In the past few months, the bank’s U.S. retail banking chief and chief marketing officer have left for competitors.

Still, Fraser has also managed to lure its share of outside talent, picking up a former Treasury official as its general counsel, hiring Goldman’s chief diversity officer and JPMorgan’s chief data officer for key positions.

This year may not be much smoother than last for Citigroup. Last month, the bank’s CFO conceded that the bank’s returns — already the lowest among the top six U.S. banks — are likely to decline this year as Wall Street revenue slows down and the benefit from reserve releases recedes.

Just one year into her tenure, however, nobody is counting Fraser out. If her March Investor Day plan is seen as credible and she starts to make progress towards her goals, the stock should recover, according to analysts. If anything, the extreme pessimism embedded in the stock means shares can’t fall much lower.

“It’s a tough job, I don’t envy her,” said a former executive. “If there’s someone who can do it, she’s the one.”