Jane Fraser CEO, Citi, speaks on 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 in addition to the bank’s reorganization got here in far higher than disclosed by the corporate’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 only a month ago, and now its several hundred million dollars higher for 2 categories,” veteran banking analyst Mike Mayo of Wells Fargo said in a phone interview. “In case your problem is credibility with investors, you then should not be doing any such thing.”
Fraser faces a key moment this week as Citigroup reports fourth-quarter and full-year 2023 earnings in the midst of restructuring efforts aimed toward making the bank right into a leaner, more profitable company. Throughout the past twenty years, Citigroup has been dogged by high expenses and eroding credibility after Fraser’s predecessors underdelivered on targets. That is left Citigroup the lowest-valued among the many six biggest U.S. banks.
Beyond the 2 charges, Citigroup disclosed Wednesday that it needed to construct reserves by $1.3 billion due to its exposure to Argentina and Russia, and that it could post a $1.7 billion expense for a special FDIC assessment tied to the 2023 regional bank failures.
All told, the fees are prone to lead to a $1 per share fourth-quarter loss, in accordance with Mayo. Despite his own skepticism that the bank can achieve its targets, Mayo recommends Citigroup stock, saying it’s so beaten down that it may double inside 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, as a substitute pointing to remarks from Mason published late Wednesday.
“While this stuff are meaningful for our 2023 results, we remain on the right track to satisfy the 2023 expense guidance (excluding FDIC and divestitures) and all of our medium-term targets,” Mason said. “The items we disclosed today don’t change our strategy.”
