Citigroup at risk of quarterly loss after charges come in far higher than initially disclosed

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Jane Fraser CEO, 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 tied to the decline of the Argentine peso as well as the bank’s reorganization came in far higher than disclosed by the company’s CFO just weeks ago.

The bank said its fourth-quarter results, scheduled to be released Friday morning, were 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.

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

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

Fraser faces a key moment this week as Citigroup reports fourth-quarter and full-year 2023 earnings in the middle of restructuring efforts aimed at making the bank into a leaner, more profitable company. Throughout the past two decades, Citigroup has been dogged by high expenses and eroding credibility after Fraser’s predecessors underdelivered on targets. That’s left Citigroup the lowest-valued among the six biggest U.S. banks.

Beyond the two charges, Citigroup disclosed Wednesday that it needed to build reserves by $1.3 billion because of its exposure to Argentina and Russia, and that it would post a $1.7 billion expense for a special FDIC assessment tied to the 2023 regional bank failures.

All told, the charges are likely to result in a $1 per share fourth-quarter loss, according to Mayo. Despite his own skepticism that the bank can achieve its targets, Mayo recommends Citigroup stock, saying it is so beaten down that it can double within three years.

Shares of the bank dipped about 1% in after hours trading Wednesday.

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

“While these items are meaningful for our 2023 results, we remain on track to meet the 2023 expense guidance (excluding FDIC and divestitures) and all of our medium-term targets,” Mason said. “The items we disclosed today do not change our strategy.”

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