Citigroup is at risk of a quarterly loss after charges were much higher than originally disclosed

Jane Fraser CEO, Citi, speaks at the Milken Institute 2023 Global Conference in Beverly Hills, California, on May 1, 2023.

Mike Blake | Reuters

Citigroup warned investors late Wednesday that the charges associated with the drop in the Argentine peso as well as the bank’s reorganization were much higher than the company’s chief financial officer disclosed several weeks ago.

The bank said its fourth-quarter results, due on Friday morning, were affected by currency translation losses of $880 million from the peso and $780 million in restructuring charges related to CEO Jane Fraser’s corporate simplification project.

Those fees are significantly higher than the “couple of hundred million dollars” apiece that CFO Mark Mason told investors to expect at a Dec. 6 conference call Goldman Sachs.

“They gave guidance just a month ago and now it’s several hundred million dollars higher for two categories,” veteran banking analyst Mike Mayo of Wells Fargo said in a telephone interview. “If your concern is credibility with investors, then you shouldn’t be doing things like this.”

Fraser faces a pivotal moment this week as Citigroup reports fourth-quarter and full-year 2023 earnings amid restructuring efforts aimed at turning the bank into a leaner, more profitable company. Over the past two decades, Citigroup has been dogged by high costs and eroded credibility after Fraser’s predecessors fell short of their goals. This means that Citigroup has the lowest value of the six largest US banks.

In addition to the two charges, Citigroup disclosed on Wednesday that it needs to create $1.3 billion in provisions for its exposure to Argentina and Russia and that it will book a $1.7 billion charge for a special FDIC assessment related to regional bank failures in 2023.

All told, the charges will likely result in a loss of $1 per share in the fourth quarter, according to Mayo. Despite his own skepticism that the bank can achieve its goals, Mayo recommends Citigroup’s stock, saying it’s so beat it could double within three years.

The bank’s shares were down about 1% during trading on Wednesday.

A Citigroup spokeswoman declined to comment on the bank’s changing guidance, instead pointing to Mason’s remarks released late Wednesday.

“While these items are significant to our 2023 results, we remain on track to meet our 2023 spending guidance (excluding FDIC and sales) and all of our mid-term targets,” Mason said. “The items we released today do not change our strategy.”

Leave a Comment