In a late Wednesday announcement, Citigroup alerted investors to anticipate increased charges related to the depreciation of the Argentine peso and the ongoing restructuring of the bank, surpassing previous disclosures made by CFO Mark Mason just weeks ago.
The forthcoming fourth-quarter results, scheduled for release on Friday morning, are set to reflect a significant impact, with $880 million attributed to currency conversion losses stemming from the peso’s decline and an additional $780 million tied to restructuring charges associated with CEO Jane Fraser’s corporate simplification initiative.
These figures stand in stark contrast to the earlier guidance provided by CFO Mark Mason during a conference hosted by Goldman Sachs on December 6, where he indicated expectations of “a couple of hundred million dollars” for each category.
Reacting to the revised figures, veteran banking analyst Mike Mayo of Wells Fargo expressed concern in a phone interview, stating, “They gave guidance just a month ago, and now it’s several hundred million dollars higher for two categories. If your problem is credibility with investors, then you shouldn’t be doing this type of thing.”
Fraser faces a pivotal moment as Citigroup unveils its fourth-quarter and full-year 2023 earnings amidst ongoing restructuring efforts aimed at transforming the bank into a leaner, more profitable entity. Citigroup has struggled over the past two decades with high expenses and credibility issues, with Fraser’s predecessors falling short of targets, leaving the bank as the lowest-valued among the six largest U.S. banks.
Beyond the aforementioned charges, Citigroup disclosed the necessity to build reserves by $1.3 billion due to exposure in Argentina and Russia. Additionally, the bank revealed a $1.7 billion expense for a special FDIC assessment linked to the 2023 regional bank failures.
In light of these developments, banking analyst Mike Mayo estimates that the charges will likely result in a $1 per share loss in the fourth quarter. Despite skepticism about the bank’s ability to meet targets, Mayo recommends Citigroup stock, suggesting that it is undervalued and could potentially double within three years.
Following the announcement, Citigroup’s shares experienced a 1% dip in after-hours trading on Wednesday.
A spokesperson for Citigroup declined to comment on the shifting guidance, instead referring to remarks from CFO Mark Mason, who stated, “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. The items we disclosed today do not change our strategy.”
