Citigroup CFO reveals $1 billion cost for massive restructuring

Mark Mason, Chief Financial Officer of Citigroup, disclosed on Wednesday, 6 December 2023, that the bank’s extensive restructuring, marking its most substantial organizational shift in decades, is expected to incur charges of approximately $1 billion for restructuring and severance. Speaking at the Goldman Sachs U.S. Financial Services Conference, Mason outlined that the overhaul is slated for full completion by the end of the first quarter of 2024.

The restructuring initiative involves streamlining management structures and potentially leading to the departure of thousands of employees. Mason emphasized that simplifying the bank’s overall structure will result in a reduction of annual expenses to a range between $51 billion and $53 billion. This move is aimed at aligning Citi with its profit targets.

In response to these developments, the bank’s shares witnessed a nearly 4% surge in Wednesday, 6 December 2023, afternoon trading, outperforming its major peers in the market. Citigroup maintains its expense estimate for 2023 at $54 billion, excluding a special assessment of about $1.65 billion from the Federal Deposit Insurance Corporation.

Mark Mason indicated that a portion of the restructuring charges, approximately $200 million, is likely to be booked in the fourth quarter. The bank’s objective, following this comprehensive reorganization, is to achieve a medium-term return on average tangible common shareholder equity (ROTCE) in the range of 11% to 12%. ROTCE serves as a key metric for evaluating company performance.

Citi’s CFO also provided insights into the bank’s revenue outlook, forecasting full-year revenue for 2023 to be around $78 billion, situated at the lower end of its earlier projections. Mason attributed some of the revenue challenges to external factors, specifically citing the impact of the Argentina elections.

Mason explained that the Argentina elections, for example, were expected to exert pressure on revenue, amounting to a couple hundred million dollars. He mentioned considering the currency impact and emphasized that it represented the cost of doing business in that region.

The ongoing reorganization at Citigroup, announced last month, involves leadership adjustments and executive relocations within divisions. The bank is streamlining its management layers from 13 to 8, marking a substantial transformation in its operational structure. CEO Jane Fraser emphasized the need to reduce bureaucracy and enhance profitability and aims to position Citi competitively in the market, seeking to address the company’s stock performance relative to its peers. Despite trailing behind in stock performance, the third-largest U.S. bank by assets exceeded estimates for third-quarter profits, driven by increased trading revenue, investment banking fees, and interest payments.