Citigroup Unveils Billion-Dollar: Citigroup’s Chief Financial Officer, Mark Mason, revealed on Wednesday that the bank’s extensive restructuring, marking its most significant overhaul in decades, is anticipated to incur charges of approximately $1 billion. This strategic revamp, set to conclude by the end of the first quarter next year, involves substantial changes, including a leaner management structure and potential layoffs affecting thousands of employees.
Speaking at the Goldman Sachs U.S. Financial Services Conference, Mason outlined the restructuring’s goal: streamlining operations to reduce annual expenses to a range between $51 billion and $53 billion. The move aligns with Citigroup’s pursuit of profit targets, prompting a nearly 4% surge in the bank’s shares during afternoon trading, outperforming industry peers.
Mason affirmed the bank’s 2023 expense estimate at $54 billion, excluding a special assessment from the Federal Deposit Insurance Corp. of about $1.65 billion. Notably, a portion of the restructuring charges, approximately $200 million, is expected to be recorded in the fourth quarter.
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As Citigroup strives for a medium-term return on average tangible common shareholders equity (ROTCE) of 11% to 12% following the reorganization, Mason emphasized ROTCE as a crucial performance metric.
CEO Jane Fraser’s vision for Citigroup’s transformation involves reducing bureaucracy, enhancing profitability, and boosting the company’s stock performance, which currently lags behind its peers. Fraser conveyed this imperative shift during a third-quarter earnings call in October, emphasizing the need to change the bank’s operational approach fundamentally.
Despite beating estimates for third-quarter profits driven by increased trading revenue, investment banking fees, and interest payments, Citigroup anticipates a full-year 2023 revenue around $78 billion, at the lower end of its initial forecast. Mason attributed this to external factors, specifically citing the impact of Argentina’s elections, which he estimated would put pressure on revenue by a couple of hundred million dollars.
The ongoing reorganization at Citigroup underscores a strategic shift within the financial giant, reflecting a commitment to adapt to market dynamics, enhance efficiency, and ultimately elevate its competitive position in the industry. Investors are closely watching as Citigroup embarks on this ambitious journey toward transformation and increased profitability.
Our Reader’s Queries
What is happening to Citigroup?
Last month, Citi revealed the latest phase of its extensive reorganization plan. The bank is streamlining its leadership structure and relocating executives within divisions. This move is part of the largest overhaul the bank has undergone in decades, with management layers being reduced from 13 to eight.
Is Citigroup too big to fail?
Citigroup Inc., The Goldman Sachs Group Inc., JPMorgan Chase & Co., and State Street Corp. are all companies that are often considered “too big to fail.” These financial institutions are so large and interconnected with the global economy that their failure could have catastrophic consequences. As a result, they are often subject to increased regulation and scrutiny from government agencies. Despite this, these companies continue to play a significant role in the financial industry and are considered key players in the global economy.
Why is Citigroup so low?
Citi’s lackluster performance can be attributed to its inability to effectively manage its noninterest operating expenses. In the last four quarters, Citi’s overhead expenses accounted for a staggering 68% of its total revenue, which is significantly higher than its competitors Wells Fargo and JPMorgan, and even surpasses Bank of America’s 64%, as reported by FactSet. This inefficiency has resulted in a poor showing for Citi, highlighting the need for better expense control measures.
How much is Citi severance?
Citi has announced that it will be cutting 2,000 jobs, resulting in severance costs of $650 million. This move is part of the bank’s ongoing efforts to streamline its operations and improve efficiency. While the decision is undoubtedly difficult for those affected, it is a necessary step for Citi to remain competitive in the current economic climate. The bank has stated that it will be providing support and resources to those impacted by the job cuts.