Significant job cuts following disappointing results
- 4Q23 net loss on several charges
- Announced significant job cuts with expected annualized cost savings of over US$2bn
- Focus to be on 2024 trajectory and turnaround execution
4Q23 net loss on several charges. Total revenue of US$17.4bn declined 3% y-o-y/13% q-o-q), missing consensus. Net interest income (NII) of US$13.8bn (+4% y-o-y/flat q-o-q) on higher interest rates, including US$250m of NII on the net investment in Argentina. Non-interest income of US$3.6bn (-24% y-o-y/-43% q-o-q) was impacted by Argentina currency devaluation, impacting revenues in Services, Markets and Banking. Net loss of US$1.8bn fell 173% y-o-y/152% q-o-q as a result of higher than expected provisions and one-time charges of US$1.7bn from a special assessment charged by the FDIC in relation to the regional banks’ rescue in 2023. During 4Q23, total credit costs of US$3.5bn was higher y-o-y/q-o-q, inclusive of a $1.3bn allowance for credit loss build associated with transfer risk in Russia and Argentina and higher cards net credit losses which are now at pre-Covid levels. CET1 ratio decreased 30bps q-o-q to 13.3% with ROE at -4.5%. At the quarter end, loans grew 5% y-o-y/3% q-o-q to US$689bn while deposits declined 4% y-o-y/grew 3% q-o-q to US$1.3T.
Restructuring with significant job cuts; focus to be on 2024 trajectory and turnaround execution. In 4Q23, Citi incurred restructuring charges amounting to US$780 million. This restructuring is expected to be completed by the end of 1Q24 and will result in annualized cost savings of over US$1bn through the elimination of approximately 5,000 roles. Over the medium term, the company plans to eliminate 20,000 positions through a combination of simplification, transformation benefits, stranded costs, and other productivity efforts. This is expected to generate annualized cost savings of over US$2bn, which compares with FY24F expense guidance of US$53.5-53.8bn driven by benefits from organizational simplification, market exits and productivity savings, partially offset by investments in risk and controls and volume-related expenses. Management projects full year revenue to range between approximately US$80bn to US$81bn. NII ex-Markets is anticipated to be down modestly y-o-y, attributed to lower U.S. rates and the reduction from closed exits and wind-down which outweighed the modest operating deposit growth and mid-single digits loan growth.