Citigroup Warns Investors of Higher Charges Than Expected

In a late Wednesday announcement, Citigroup warned investors that charges related to the decline of the Argentine peso and the bank’s reorganization were significantly higher than previously disclosed by the company’s CFO. The bank’s fourth-quarter results, set to be released on Friday, were impacted by $880 million in currency conversion losses and $780 million in restructuring charges tied to CEO Jane Fraser’s corporate simplification project.

Higher Charges Than Expected

The charges incurred by Citigroup were much higher than what CFO Mark Mason had guided investors to expect at a conference in early December. This discrepancy has raised concerns about the bank’s credibility with investors.

A Crucial Moment for CEO Jane Fraser

CEO Jane Fraser is facing a critical moment as Citigroup reports its fourth-quarter and full-year 2023 earnings. The bank is currently undergoing restructuring efforts to become a leaner and more profitable company. Citigroup has struggled with high expenses and eroding credibility over the past two decades, making it the lowest valued among the six largest U.S. banks.

Additional Reserves and Expenses

In addition to the charges mentioned, Citigroup also disclosed that it needed to build reserves of $1.3 billion due to its exposure to Argentina and Russia. The bank will also incur a $1.7 billion expense for a special FDIC assessment related to regional bank failures in 2023.

Expected Loss and Stock Performance

Analyst Mike Mayo of Wells Fargo predicts that the charges will result in a $1 per share loss for the fourth quarter. Despite his skepticism about the bank’s ability to achieve its targets, Mayo recommends Citigroup stock, stating that it is undervalued and has the potential to double within three years. Following the announcement, the bank’s shares dipped about 1% in after-hours trading.

Response from Citigroup

A Citigroup spokeswoman declined to comment on the shifting guidance but referred to remarks from CFO Mark Mason. Mason stated that while the charges are significant for the bank’s 2023 results, they do not change the bank’s strategy or its ability to meet its expense guidance and medium-term targets.