CITI Bank to remove 20,000 employees to increase profit, Bank reported $1.9 billion loss this quarter

Citigroup, a major US bank, has revealed plans to reduce its workforce by 20,000 employees over the next few years. This move is part of a broader effort to reorganize the company, aiming to increase profits and provide returns to shareholders.

Downsize Details:

The downsizing strategy was presented alongside Citigroup’s fourth-quarter results, where the bank reported a significant loss. The goal is to bring the total number of employees down to about 180,000 by 2026, compared to 240,000 at the end of 2022. This figure also accounts for the anticipated spinoff of Citi’s Mexico subsidiary, Banamex. The job cuts could cost as much as $1.8 billion, Citigroup said but will save $2.5 billion a year by 2026.

Corporate Overhaul:

Citigroup’s CEO, Jane Fraser, has introduced a corporate overhaul that includes restructuring the business into five lines instead of two. The bank has also scaled down its global consumer banking presence by selling off assets in countries like China and Vietnam.

Purpose of Changes:

The announced changes align the organizational structure with the bank’s strategy, aiming to create a simpler and more efficient firm. The ultimate goal is to operate faster, better serve clients, and generate value for shareholders.

Financial Impact:

Citigroup reported a loss of $1.9 billion in the fourth quarter, a significant drop from the $2.5 billion profit in the same period in 2022. Revenues also declined by three percent to $17.4 billion. Several cost items contributed to the poor results, including a $780 million expense for severance and other costs related to the reorganization.

Revenue:

Revenue from markets, or the trading division, dropped 19% to $3.4 billion from a year earlier. In US personal banking, revenue climbed 12% to $4.9 billion, lifted by retail banking and credit cards. The bank expects to report between $700 million and $1 billion in charges this year related to severance costs and the reorganization.

Job Cut Projection:

The announced fourth-quarter charge of $780 million corresponds to approximately 7,000 job cuts expected over the next year.

Other Financial Impacts:

• In addition to job cut-related costs, Citigroup incurred a $1.7 billion special assessment to replenish a Federal Deposit Insurance Corporation (FDIC) emergency fund.
• Reserves of $1.3 billion were booked for risks associated with Argentina and Russia.
• The devaluation of the Argentine peso also contributed to a hit of $880 million.