Citigroup issued a warning to investors revealing that charges related to the decline of the Argentine peso and the bank’s reorganization were significantly higher than previously disclosed by the CFO just weeks ago. The bank reported that its fourth-quarter results, due to be released on Friday, 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.
These figures contrast sharply with the earlier guidance provided by CFO Mark Mason, who had suggested “a couple of hundred million dollars” for each category at a conference on December 6 hosted by Goldman Sachs. The unexpected increase in charges has raised concerns about the bank’s credibility with investors.
Citigroup is currently undergoing restructuring efforts under CEO Jane Fraser’s leadership, aiming to transform into a more streamlined and profitable entity. The bank has struggled with high expenses and credibility issues over the past two decades, making it the lowest-valued among the six largest U.S. banks.
In addition to the charges related to the Argentine peso and restructuring, Citigroup disclosed the need to build reserves by $1.3 billion due to exposure to Argentina and Russia. Furthermore, the bank expects a $1.7 billion expense for a special FDIC assessment linked to regional bank failures in 2023.
Banking analyst Mike Mayo of Wells Fargo expressed skepticism about Citigroup’s ability to meet its targets but recommended Citigroup stock, citing its low valuation, suggesting it could potentially double within three years. Following the disclosure, Citigroup’s shares dipped about 1% in after-hours trading. The bank has not provided comments on the shifting situation. a warning to investors
guidance, instead pointing to remarks from Mason published late Wednesday.
“While these items are meaningful for our 2023 results, we remain on track to meet the 2023 expense guidance (excluding FDIC and divestitures) and all of our medium-term targets,” Mason said. “The items we disclosed today do not change our strategy.”