(Bloomberg) -- Now that she’s broken Wall Street’s thickest glass ceiling, new Citigroup Inc. Chief Executive Officer Jane Fraser’s next challenge will be to achieve what eluded her predecessors -- but in the wake of a pandemic.

For years, the expansive consumer and investment bank has repeatedly missed its own targets for boosting profitability, leaving it as the worst performer among the five Wall Street giants.

And despite big investments to bolster internal oversight, the firm made headlines in August for mistakenly wiring $900 million to hedge funds that wouldn’t give it back. From Washington watchdogs to an activist shareholder, she’ll have to quell any doubts over whether the bank is on the right path.

That’s the setting for a drama that will likely captivate Wall Street for years: Will the first woman to run a giant U.S. bank conquer Citigroup’s most intractable challenges?

In tapping Fraser, who takes over from CEO Mike Corbat in February, the board is betting on a former McKinsey & Co. partner who already has experience running Citigroup’s strategic team, mortgage unit and consumer bank -- areas that will take center stage as the lender faces loan defaults and other fallout from the coronavirus pandemic.

Decades ago, she even co-wrote a book on the barriers companies must overcome to operate around the globe, which happened to include sections on the one she’s now set to lead.

Lagging Peers

Her appointment to CEO is “obviously welcome, but a mixed blessing given the challenges of managing these mega banks,” said Sheila Bair, a former chairman of the U.S. Federal Deposit Insurance Corp. “I wish her the best. Maybe women can succeed where the men have failed. At least she will have her shot.”

That said, Citigroup is by no means a glass cliff, in which a woman is elevated to lead at a moment when defeat is probable. While announcing her ascent Thursday, the board applauded Corbat for the progress he’s made overhauling and simplifying the bank since its near collapse in the 2008 financial crisis. The company has returned more than $80 billion of capital to shareholders over past six years.

“Corbat made Citi a better bank,” acknowledged Bair, who has long been a fierce critic of its bailout. Yet the obstacles that remain are formidable.

Citigroup’s profitability has long lagged peers. As the pandemic surged across the U.S. in April, the firm abandoned a target for improving return on tangible common equity, a key measure of profitability, to somewhere between 12% and 13%. JPMorgan Chase & Co. and Bank of America Corp. boasted ratios of 17% and 15% at the end of last year, respectively.

Rivals have seen gains in large wealth and asset management units that rode the wave of a decade-long bull market, while Citigroup sold its brokerage to Morgan Stanley during the last crisis. And firms like JPMorgan have seized on a strong U.S. consumer while Citigroup’s retail unit is more international.

‘Personally Thrilled’

Under Corbat, Citigroup’s profits more than doubled to almost $20 billion. He’s also sought to make Citigroup a leader on environmental and social issues. The firm won accolades for commitment to diversity and inclusion when it became one of the first companies to offer an uncharacteristically blunt assessment of the pay gap between men and women in its global workforce in 2019.

Still, Citigroup’s stock price remains less than a 10th what it was before the 2008 crisis. And the bank’s price-to-book ratio, comparing its market value to what the firm says its pieces are worth, is 0.61. That pales in comparison to JPMorgan’s ratio of 1.30 and Bank of America’s 0.90.

That Fraser was picked to close that gap didn’t come as a surprise to the industry, but the timing did. The decision to elevate her was accelerated by both Corbat and the board in recent weeks as the bank weighed how it would emerge from the coronavirus pandemic. Corbat, 60, had said when elevating her to president last October that he was committed to leading the firm “in the coming years.”

“We believed that Corbat’s age meant that he likely had a few years left as CEO,” Brian Kleinhanzl, an analyst at Keefe Brueyette & Woods, wrote to clients, noting some investors had hoped an outsider would take over. “In the end, if Fraser can improve returns closer to peer levels then the move will be positive.”

Acting Comptroller of the Currency Brian Brooks, one of Citigroup’s key regulators, said he’s “personally thrilled” about Fraser’s selection. Activist shareholder ValueAct Capital, which invested in 2018, also welcomed the change.

“We have developed a deep appreciation for her ability to lead thoughtful strategic transformation and drive operational results,” ValueAct partner Dylan Haggart said.

‘Don’t Screw This Up’

Fraser is no stranger to the pressures of being a pioneer and has talked openly about the sexism she’s faced in the workplace. After stints at Goldman Sachs Group Inc. and Asesores Bursátiles in Madrid, she joined McKinsey in the mid-1990s. She nabbed the elusive partner title one week after giving birth to her first child.

“I’d been told not to get pregnant in the run up,” Fraser said on a podcast with CNN in 2018. It wasn’t a case of a bad boss, she said, but “friendly advice” from people advising, “‘Don’t screw this up. Why don’t you just wait a year?’ And that’s not me.”

She opted to work at the consultancy part time while her two sons were young.

Her star rose quickly after she joined Citigroup in 2004. Within three years, she was named global head of strategy and worked alongside then-CEO Vikram Pandit. The two sold off and shuttered entire businesses -- eliminating nearly 100,000 jobs -- as the bank teetered toward the financial crisis.

“Jane’s talents as an executive and leader were evident,” Pandit wrote in an email on Thursday. “She’s demonstrated over the past decade that she can manage just about any business and region at Citi, and this appointment is a testament to her ability. Good for her and good for the company.”

Facing Sexism

She was later picked to run the firm’s U.S. consumer and commercial bank -- a role giving her plenty of face time with regulators scrutinizing the company’s operations and procedures in the aftermath of the crisis. In 2015, she was named to run the bank’s operations in Latin America.

Fraser was en route to Mexico soon after when she passed an airport newsstand and spotted a headline that called her appointment an insult to the country, not only because she was a foreigner but because she was a woman.

“We’d seen some of the press earlier but it’s different when you see it in black and white,” she said, recounting the experience on a panel this year.

Fraser, who co-chairs Citigroup’s women affinity group, has been known throughout her career for identifying, mentoring and elevating those who show promise.

She “is incredibly wonderful about supporting other women even when they’re at competitive banks,” Dina Powell, a partner at Goldman Sachs, said of Fraser when the two appeared on the panel earlier this year. “I do just want to say how proud I am of Jane, she has been a role model to so many of us in finance.”

In public, Fraser often distinguishes between Wall Street’s longstanding bro culture -- rampant when she was getting her start in finance in the 1980s -- and more quiet sexism, where men who are impeccably polite to women simply don’t seek to support and advance female colleagues. She has called the latter version more sinister.

When on the receiving end, she’s said she tries to face such moments head on, often with a touch of humor. Her underlying philosophy is that the industry undermines its own performance by being so backward.

“There’s a bonus to diversity, and it’s not just gender,” Fraser said at the panel. “I think that’s beginning to be understood -- that having diversity isn’t a trade-off to excellence. It’s a path to excellence.”

©2020 Bloomberg L.P.