Jane Fraser, CEO of Citi, speaks at the 2023 Milken Institute Global Conference in Beverly Hills, California, May 1, 2023.
Mike Blake | Reuters
Citigroup warned investors late Wednesday that charges linked to the devaluation of the Argentine peso as well as the bank’s reorganization were much higher than what the company’s chief financial officer disclosed just weeks ago.
The bank said its fourth-quarter results, scheduled to be published on Friday morning, were affected by losses of $880 million in peso currency conversion and $780 million in restructuring charges linked to Chief Executive Jane Fraser’s corporate simplification project.
These fees are much higher than the “$200 million” apiece that CFO Mark Mason told investors to expect at a December 6 conference hosted by Goldman Sachs.
“They gave the guidance just a month ago, and now it’s hundreds of millions of dollars higher for two categories,” veteran banking analyst Mike Mayo of Wells Fargo said in a phone interview. “If your issue is credibility with investors, you shouldn’t be doing this kind of thing.”
Fraser faces a big 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. For the past two decades, Citigroup has struggled with rising expenses and eroding credibility after Fraser’s predecessors failed to deliver. This made Citigroup the least valuable bank among the six largest American banks.
In addition to the two charges, Citigroup revealed on Wednesday that it needs to build up $1.3 billion in reserves due to its exposure to Argentina and Russia, and that it will take on a $1.7 billion charge for a special FDIC assessment tied to the failure of regional banks in 2023.
Finally, these charges will likely result in a loss of $1 per share in the fourth quarter, according to Mayo. Despite his own doubts about the bank’s ability to achieve its goals, Mayo recommends Citigroup shares, saying they have been so depressed they could double within three years.
The bank’s shares fell about 1% in after-hours trading on Wednesday.
A Citigroup spokeswoman declined to comment on the bank’s change in guidance, instead referring to Mason’s comments published late Wednesday.
“While these items are beneficial to our 2023 results, we remain on track to achieve our 2023 expense guidance (excluding FDIC and divestments) and all of our medium-term goals,” Mason said. “The items we disclosed today do not change our strategy.”