The Citigroup logo in a file photo taken on the floor of the New York Stock Exchange. Brendan McDermid (Portal)
Citigroup will use fourth quarter 2023 results to clean up its balance sheet. Among the write-offs and provisions of around $3.7 billion that the company will make in its accounts that it plans to publish this Friday, there is $1.6 billion (approximately 1.46 billion euros) related to Argentina, the documentation says, was registered with the US Securities and Exchange Commission (SEC) this Wednesday.
The US bank attributes 1.3 billion in write-downs to “transfer risks associated with exposures outside the United States arising from safety and soundness considerations under US banking legislation,” of which 720 million were in Argentina and 580 million accounted for by Russia. In the Argentine case, Citigroup specifically speaks of “cross-border and cross-currency risks in Argentina, based on prevailing economic trends, currency devaluation and geopolitical risk, which could impact Argentina's ability to maintain external debt servicing.”
Although Citi had already pointed this out, it now states that it “recorded a translation loss of approximately $880 million in revenue in Argentina during the quarter due to the recent devaluation of the Argentine peso.” The Services, Markets and Banking segments were affected by this decline in sales. Citi also generated net interest income of approximately $250 million from its net investments in Argentina in the fourth quarter of 2023, which is not included in this figure.
After coming to power through an election victory, new President Javier Milei agreed to a 50% devaluation of the Argentine peso. The government is proposing a period of drastic adjustments in the Argentine economy. In its latest quarterly report, covering the third quarter of last year, the bank estimated its investments in Argentina, where it operates wholesale business, at around $1.9 billion. In it he warned that he would suffer significant losses if the official exchange rate was devalued until it approached the market rate.
Other games
Aside from the devaluation and crises in Argentina and Russia, Citi's fourth-quarter results will be hit by further writedowns. The bank had already discussed these items in the past, but now the amounts have been determined and the bank is taking the opportunity to accumulate them all at the end of a year that was already rather discrete in terms of results.
Citi recorded a charge of approximately $1.7 billion in operating expenses during the quarter related to and related to the special assessment of the Federal Deposit Insurance Corporation (FDIC) as part of the bill that the company is entitled to for last year's banking crisis is the rescue of several banks. The bank had initially estimated the amount at up to $1.5 billion in its third-quarter financial statements, then raised the estimate to $1.65 billion in a recent investor presentation.
Additionally, the bank recorded restructuring charges of approximately $780 million in the quarter, largely attributable to severance payments, non-cash asset impairments and other related costs as Citi implements its simplification initiatives. Organizational and administrative expenses as of 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.
“These items will be reflected in Citi’s fourth quarter and full year 2023 earnings materials to be published on January 12, 2024,” it said in its notice to the regulator. JP Morgan Chase, Bank of America and Wells Fargo will also present their accounts on this day.
“Although we rarely release quarterly results information ahead of expected earnings release dates, we felt this was a wise move in our effort to build credibility and be transparent,” wrote Mark Mason, the company's chief financial officer, in a statement quoted by Portal. “The elements we revealed today do not change our strategy.”
Citigroup sold its retail banking business in Argentina at the end of 2016 to optimize its footprint, simplify the bank and reduce costs. The bank's operations in Argentina began in 1914 with its first branch outside the United States. In 2018, Citigroup Inc. converted its accounting in Argentina to the U.S. dollar after labeling the economy there as “highly inflationary.”
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