Citi's restructuring will be traumatic. The American bank is planning around 20,000 layoffs over the next three years, it announced this Friday after presenting results in which it suffered quarterly losses of 1,839 million dollars and a 38% drop in annual profits to 9,228 million. The group's CEO, Jane Fraser, is in the process of restructuring the group into different divisions, which will mean the Wall Street giant's toughest adjustment in decades, with staff cuts of almost 10%.
By cutting 20,000 jobs, the bank expects to save between $51 billion and $53 billion. In connection with the layoffs of around 6,000 people, the group has already incurred expenses for compensation and layoffs; In the fourth quarter, the company sought around 800 million euros for restructuring and layoffs, affecting around 7,000 more people. In addition, the company expects to generate another 700 to 1,000 million euros in 2024, mainly for remuneration, as detailed in a presentation to analysts in which it says that it expects “a net reduction in the workforce” of these 20,000 people in the medium term.
The personnel of the subsidiary in Mexico and other companies for sale are excluded from this calculation. According to finance director Mark Mason, the group's workforce will be reduced by 60,000 jobs to 180,000 by the end of 2026. This includes the 20,000 layoffs and the 40,000 employees that will be deconsolidated through the IPO and spin-off of the Mexican subsidiary Banamex.
The announcement of cost-cutting measures comes after a disappointing fourth quarter in which Citigroup's fixed income business posted its worst results in five years.
“Although the fourth quarter was very disappointing due to the impact of notable elements, we made significant progress in simplifying Citi and executing our strategy in 2023,” Fraser said in the earnings release. “We have restructured around five interrelated core businesses to align our organization with our strategy and provide greater transparency into their performance,” he added. “Given how far we have come in terms of simplification and divestment, 2024 will be a turning point,” he explained.
Citi's fourth-quarter revenue fell 3% year over year to $17.44 billion, according to reports filed Friday. The bank broke down the results of its five divisions: services, markets, banking, retail banking in the United States and wealth management, which were previously grouped into larger divisions.
Markets revenue fell 19% year-over-year to $3.41 billion in the quarter, driven by a 25% decline in fixed income revenue due to lull in interest rate and foreign exchange markets and Argentina's losses. For the year as a whole they fell by 6% to 18,857 million.
In contrast, wholesale banking revenue increased 22% to $949 million, driven by higher investment banking fees for debt and advisory capital markets, which increased 27% to $669 million and the were able to offset the decline in loans to companies. For the full year, investment banking grew 1% to 2,510 million, while corporate banking fell 4% to 2,473 million.
U.S. retail banking revenue increased 12% to $4.94 billion, driven by retail banking and credit cards. During the year it is also one of the fastest growing areas, with revenue increasing by 14% to 19,187 million.
In asset and heritage management, revenue fell 3% to $1,671 million for the quarter and 5% to $7,091 million for full-year 2023; In the services sector they rose by 6% in the quarter to 4,500 million and by 16% in the year to 18,050 million.
While JPMorgan ended 2023 with record profits and Wells Fargo and Bank of America rescued the course, Citi's balance sheets were hurt not only by worse operating performance but also by its balance sheet cleanup, including adjustments for its operations in Argentina and Russia and its part of the bill to rehabilitate the banks that had to be bailed out through the deposit insurance fund, to which Citi must contribute an additional $1.7 billion.
Citigroup used its fourth quarter 2023 results to clean up its balance sheet. Of the approximately $4.66 billion in write-offs and provisions that the company has made in its accounts, Argentina accounts for $1.6 billion (approximately 1.46 billion euros), it was announced on Wednesday. The bank recorded write-downs in Russia and 1.7 billion for the deposit insurance fund. Additionally, the Company recorded restructuring charges of approximately $780 million during the quarter, largely attributable to severance payments, non-cash asset impairments and other related costs, as part of Citi's implementation of its organizational and administrative simplification initiatives starting year-end 2023. CEO Jane Fraser is trying to streamline and increase Citigroup's profitability, including by cutting staff and exiting retail operations around the world.
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