Citigroup CEO Jane Fraser’s massive restructuring to cost $1B

Citigroup Chief Financial Officer Mark Mason said Wednesday the bank’s largest reorganization in decades will cost about $1 billion for charges related to restructuring and severance.

The overhaul is expected to be fully completed by the end of the first quarter next year, Mason told the Goldman Sachs US Financial Services Conference. The changes by CEO Jane Fraser include slimming down management and potentially laying off thousands of employees.

Simplifying the bank’s structure will enable it to reduce annual expenses to between $51 billion and $53 billion, he added, helping Citi approach its profit targets.

Shares of the bank closed up 2.5% at $47.86.

The bank maintained its estimate for 2023 expenses at $54 billion, excluding a special assessment from the Federal Deposit Insurance Corp. of about $1.65 billion.

Some of the restructuring charges of about $200 million will probably be booked in the fourth quarter, according to Mason.

The bank aims to reach a medium-term return on average tangible common shareholders equity of 11% to 12% in the medium term after the reorganization. ROTCE is a measure of company performance.

Citi’s full-year revenue in 2023 will probably come in at about $78 billion, the lower end of its previous forecast, Mason said.

Mason cited Argentina as a factor reducing Citi’s revenue.

“The Argentina elections for example, that is going to put pressure on revenue for a couple of hundred million dollars,” he said. “Thinking about the currency impact, that’s the cost of us doing business there.”

Rorganization

Citi announced the latest phase of its sweeping reorganization last month, trimming leadership and moving executives within divisions. The bank is reducing management layers from 13 to eight as part of its biggest overhaul in decades.

Fraser aims to reduce bureaucracy and increase profits while boosting the company’s stock, which lags its peers. “We need to change how we run Citi in order to truly transform it once and for all,” Fraser told analysts on a third quarter earnings call in October.

The third-largest US bank by assets beat estimates for third quarter profits, driven by rising trading revenue, investment banking fees and interest payments.