Jane Fraser CEO, Citi, speaks at the 2023 Milken Institute Global Conference in Beverly Hills, California, May 1, 2023.
Mike Blake | Reuters
Citigroup warned investors late Wednesday that charges tied to the decline of the Argentine peso in addition to the bank’s reorganization got here in far higher than disclosed by the corporate’s CFO just weeks ago.
The bank said its fourth-quarter results, scheduled to be released Friday morning, were impacted by $880 million in currency conversion losses from the peso and $780 million in restructuring charges tied to CEO Jane Fraser’s corporate simplification project.
Those charges are significantly higher than the “couple hundred million dollars” apiece that CFO Mark Mason told investors to expect at a Dec. 6 conference hosted by Goldman Sachs.
“They gave guidance only a month ago, and now its several hundred million dollars higher for 2 categories,” veteran banking analyst Mike Mayo of Wells Fargo said in a phone interview. “In case your problem is credibility with investors, then you definately should not be doing this sort of thing.”
Fraser faces a key moment this week as Citigroup reports fourth-quarter and full-year 2023 earnings in the center of restructuring efforts aimed at making the bank right into a leaner, more profitable company. Throughout the past 20 years, Citigroup has been dogged by high expenses and eroding credibility after Fraser’s predecessors underdelivered on targets. That is left Citigroup the lowest-valued among the many six biggest U.S. banks.
Beyond the 2 charges, Citigroup disclosed Wednesday that it needed to construct reserves by $1.3 billion because of its exposure to Argentina and Russia, and that it could post a $1.7 billion expense for a special FDIC assessment tied to the 2023 regional bank failures.
All told, the charges are more likely to end in a $1 per share fourth-quarter loss, based on Mayo. Despite his own skepticism that the bank can achieve its targets, Mayo recommends Citigroup stock, saying it’s so beaten down that it may double inside three years.
Shares of the bank dipped about 1% in after hours trading Wednesday.
A Citigroup spokeswoman declined to comment on the bank’s shifting guidance, as a substitute pointing to remarks from Mason published late Wednesday.
“While these things are meaningful for our 2023 results, we remain heading in the right direction to fulfill the 2023 expense guidance (excluding FDIC and divestitures) and all of our medium-term targets,” Mason said. “The items we disclosed today don’t change our strategy.”