Citi CEO Jane Fraser speaks at the 2023 Milken Institute Global Conference in Beverly Hills, California on May 1, 2023.
Mike Blake | Portal
Citigroup warned investors late Wednesday that charges related to the fall in the Argentine peso and the bank's restructuring were far greater than the company's CFO had disclosed just weeks ago.
The bank said its fourth-quarter results, scheduled to be released Friday morning, were hit by $880 million in foreign exchange losses from the peso and $780 million in restructuring charges related to CEO Jane's corporate simplification project Fraser were affected.
Those fees are significantly higher than the “couple hundred million dollars” apiece that CFO Mark Mason told investors at a Dec. 6 conference hosted by Goldman Sachs.
“They gave guidance just a month ago, and now they're several hundred million dollars higher for two categories,” veteran banking analyst Mike Mayo of Wells Fargo said in a telephone interview. “If your problem is credibility with investors, you shouldn’t do something like this.”
Fraser faces a pivotal moment this week as Citigroup reports fourth-quarter and full-year 2023 results amid restructuring efforts aimed at making the bank a leaner, more profitable company. Over the past two decades, Citigroup has faced heavy spending and a loss of credibility after Fraser's predecessors failed to achieve their goals. This makes Citigroup the lowest rated bank among the six largest US banks.
Beyond the two allegations, Citigroup said Wednesday that it needed to build up $1.3 billion in reserves due to its exposure to Argentina and Russia and that it had incurred a $1.7 billion expense for a special FDIC assessment related to the regional bank failures will be recorded in 2023.
All told, the charges are expected to result in a loss of $1 per share in the fourth quarter, according to Mayo. Despite his own skepticism that the bank can achieve its goals, Mayo recommends Citigroup stock, saying it has fallen so badly that it could double in three years.
The bank's shares fell about 1% in after-hours trading on Wednesday.
A Citigroup spokeswoman declined to comment on the bank's changed guidance, instead referring to remarks from Mason released late Wednesday.
“While these items are significant to our 2023 results, we remain on track to meet 2023 expense guidance (excluding FDIC and divestitures) and all of our medium-term targets,” Mason said. “The points we announced today do not change our strategy.”