Citigroup announced major restructuring plans on Friday including cutting its global workforce by 10% or 20,000 jobs after reporting disappointing fourth quarter results. The job cuts will be implemented over the next two years as part of CEO Jane Fraser’s ongoing overhaul of the bank to improve returns.
Citi Reports Nearly $2 Billion Loss in Q4, Revenue Drops on Several Charges
Citi plunged to a $1.8 billion loss in the fourth quarter after taking charges of $8.3 billion related to winding down its consumer banking unit in China, selling its Philippines business, and writing down assets in Russia.
Here is a summary of Citi’s fourth quarter results:
| Metric | Q4 2022 | Change | Analyst Estimates |
|---|---|---|---|
| Earnings/Share (Loss) | ($0.98) | -116% | $0.11 |
| Revenue | $17.4 billion | -3% | $18.2 billion |
“This quarter’s results were very disappointing,” CEO Jane Fraser said. “We paid the price for macroeconomic and geopolitical
uncertainties as well as the cumulative impact of poor risk and control environment.”
The quarterly loss compares to a profit of $3.2 billion, or $1.46 per share a year ago. Revenue dropped 3%, missing analyst estimates.
Citi’s Global Consumer Banking revenue fell 16%, partially blamed on the lack of the $500 million benefit Citi got from recording a write-up in its investment in Morgan Stanley’s wealth business in 2021 which did not recur.
Citi Plans to Slash Headcount by 20,000 Jobs Over Next Two Years
As part of its ongoing transformation efforts to improve returns, Citi said on Friday it is targeting capacity for approximately $900 million of incremental investment spending efficiency savings in 2023 and 2024.
“We will complete our repositioning work in the coming quarter and have begun executing on the initiatives announced today across the firm,” Citi CFO Mark Mason said.
The bank said the actions are expected to result in savings of around $500 million in 2023 with additional savings coming in 2024 and beyond. However, Citi expects to take $1 billion in repositioning charges over those two years.
Citi plans to achieve those savings in large part by slashing its global consumer bank division headcount by around 4,000 roles in the coming weeks and roughly 14,000 roles starting later this year and continuing into 2024.
In total, the reduction in headcount is expected to cut around 10% of Citi’s more than 200,000 employees globally.
The restructuring actions are part of Fraser’s ongoing efforts to transform Citi into a leaner and more focused firm concentrating resources on businesses where it has competitive advantages.
Since taking over in 2021, Fraser has sought to simplify Citi’s structure by winding down unprofitable divisions including its consumer banking units in 13 international markets. Last year, Citi also sold its consumer businesses in Indonesia, Malaysia, Thailand and Vietnam. Just this week, Citi announced the sale of its consumer unit in the Philippines.
The aggressive repositioning actions have raised some concerns over their impact on company morale, but analysts still generally support the moves as necessary.
Outlook: More Upheaval Expected for Citi in 2023 But Positioning for Future Growth
While the significant restructuring efforts are cutting deep now, Citi expects to benefit from them over time through realizing savings and the ability to redeploy funds into more growth-oriented areas.
“We’ve completed the hard work of determining our new strategy, exiting 13 consumer markets and identifying areas where we are overinvested,” Fraser said regarding Citi’s progress in its multi-year transformation. “We will move with urgency to capture the savings and benefits of our efforts.”
The consumer banking unit cuts represent the last major phase of Citi’s repositioning work, setting the stage for it to finally be able to turn more of its attention towards investing in areas central to its refreshed strategy.
Citi reaffirmed its key targets including rotating low-returning assets into higher-yielding alternatives to produce returns on tangible common equity above 11% by 2023 or sooner.
The extensive restructuring is likely to continue weighing on results and morale in the near-term, but is seen as necessary medicine for improving long-term performance. 2024 marks an important year for Citi to demonstrate its strategy taking shape through stabilizing financials and redirecting efforts on driving sustainable growth.
References:
Barrons: Citi’s ‘Very Disappointing’ Quarter Results in Net Loss; Stock Rises
The Guardian: Citi bank to cut 20,000 jobs after disappointing results
CNBC: Citigroup cutting 10% of workforce
CNN: Citigroup announces major job cuts after ‘very disappointing’ earnings report
Fox Business: Citigroup announces elimination of 20,000 jobs after losses
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