Citigroup Discloses Higher-Than-Expected Charges Ahead of Fourth-Quarter Results
Jane Fraser, CEO of Citigroup, spoke at the 2023 Milken Institute Global Conference in Beverly Hills, California on May 1, 2023. Just a few days later, Citigroup warned investors about higher-than-expected charges related to the decline of the Argentine peso and the bank’s reorganization.
The bank revealed that its fourth-quarter results, set to be released on Friday, would be impacted by $880 million in currency conversion losses from the peso and $780 million in restructuring charges tied to CEO Jane Fraser’s corporate simplification project. These figures are significantly higher than what CFO Mark Mason had indicated just weeks ago.
According to Citigroup, the charges are far higher than the “couple hundred million dollars” apiece that Mason had told investors to expect at a conference in December.
Veteran banking analyst Mike Mayo of Wells Fargo expressed concerns about the credibility of the bank, stating, “If your problem is credibility with investors, then you shouldn’t be doing this type of thing.”
Fraser, who is leading the bank’s restructuring efforts, faces a crucial moment as Citigroup reports its fourth-quarter and full-year 2023 earnings. These efforts are aimed at making the bank into a leaner and more profitable company after decades of high expenses and eroding credibility.
In addition to the unexpected charges, Citigroup also disclosed the need to build reserves by $1.3 billion due to its exposure to Argentina and Russia. The bank also revealed it would post a $1.7 billion expense for a special FDIC assessment tied to the 2023 regional bank failures.
Mike Mayo suggested that these charges would likely result in a $1 per share fourth-quarter loss. Despite this, he recommended Citigroup stock, believing that it is undervalued and has the potential to double within three years.
Following the news, shares of the bank dipped about 1% in after-hours trading on Wednesday. Citigroup declined to comment on the shifting guidance, pointing to remarks from CFO Mark Mason, who stated that the disclosed items do not change the bank’s strategy and that they remain on track to meet their 2023 expense guidance and medium-term targets.