Citi to cut 20,000 jobs, posts $2.3 billion loss in 'disappointing' quarter

Citigroup said it would cut 20,000 jobs over the next two years, acknowledging a "clearly disappointing" quarter marred by one-off charges that resulted in a US$1.8 billion (S$2.3 billion) loss.

Shares of the bank — which is in the middle of a multi-year effort to cut bureaucracy, increase profits and boost a stock that has lagged peers — are up more than one per cent.

"The fourth quarter was very clearly disappointing," CEO Jane Fraser told analysts. "We know that 2024 is critical."

The lender will reduce its global workforce of 239,000 by 20,000 — or roughly eight per cent of staff — through 2026, including layoffs from the sweeping reorganisation, Chief Financial Officer Mark Mason told reporters.

Citi will also no longer count 40,000 jobs when it spins off and lists its Mexican consumer unit Banamex in an eventual initial public offering, eventually aiming to reach a staffing level of 180,000 employees, Mason said.

Still, some analysts said results from the third-largest US lender by assets appeared strong when the one-off charges were excluded.

"Citigroup's earnings looked awful with a big loss of US$1.8 billion, but the bank's underlying business showed resilience," said Octavio Marenzi, CEO at management consultancy firm Opimas.

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The loss was driven by US$3.8 billion in charges disclosed in a filing on Wednesday (Jan 10) that included reorganisation expenses, a reserve related to currency devaluations and instability in Argentina and Russia and a US$1.7 billion payment to replenish a government deposit insurance fund.

The bank expects to report between US$700 million and US$1 billion in charges this year related to severance costs and the reorganisation.

"Whenever an industry or company goes through these types of reductions, it's tough on morale," Mason told reporters. The staffing cuts will not affect revenue growth, he said.

During the week of Jan 22, the bank will announce more organisational changes, according to a memo to staff seen by Reuters.

Efforts to simplify its structure will be largely completed this quarter, saving US$1 billion and eliminating about 5,000 mostly managerial roles, Fraser said.

'Can they execute?'

Rivals JPMorgan Chase and Bank of America on Friday reported lower quarterly profits, while Wells Fargo outperformed on cost cuts.

Citi's revenue fell three per cent to US$17.4 billion in the quarter from a year earlier.

It was the first time the bank broke out earnings for its five businesses — services, markets, banking, US personal banking and wealth, which were previously housed under broader divisions.

Revenue from markets, or the trading division, dropped 19 per cent to US$3.4 billion from a year earlier.

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It was dragged lower by a 25 per cent plunge in fixed income revenue from sluggish rates and currency markets, as well as losses from Argentina.

In contrast, banking revenue climbed 22 per cent to US$949 million, led by higher investment banking fees for debt capital markets and advisory work that offset a slide in corporate lending.

In US personal banking, revenue climbed 12 per cent to US$4.9 billion, lifted by retail banking and credit cards.

But consumers have begun to show signs of stress, prompting Citi to set aside more money to cover losses on souring loans.

"The restructuring announced two months ago was a long time coming," said Chris Marinac, director of research at Janney Montgomery Scott.

"The question comes down to: Can they execute on this restructuring in terms of really being able to grow the core business? The jury is still out."

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