Citigroup To Cut 20,000 Jobs In Major Strategic Overhaul, Cites ‘Disappointing’ Q4 – Citigroup (NYSE:C)

Citigroup Inc. (NYSE: C) recently announced plans to cut 20,000 jobs in a bid to improve the bank’s performance. This decision comes as Citigroup’s revenue has been underwhelming in recent times, prompting CEO Jane Fraser to take action.

The bank expects these job cuts to result in significant savings, potentially reaching $2.5 billion. As part of the restructuring plan, Citigroup aims to decrease overall expenses, targeting $51 billion to $53 billion by 2026.

However, the bank also anticipates incurring costs of up to $1 billion this year, primarily due to severance and restructuring expenses. This announcement follows a challenging quarter for Citigroup, particularly in its fixed-income trading sector, where revenue dropped by 25% to $2.6 billion due to a decline in client activity.

“The fourth quarter was very disappointing,” said CEO Jane Fraser. “Given how far we are down the path of our simplification and divestitures, 2024 will be a turning point.”

Despite the news of job cuts, Citigroup’s shares experienced a rise of over 1.5% in New York. This increase followed a previous 1.8% drop, which was a reaction to the bank’s announcement of substantial one-time charges related to its restructuring and economic challenges in Argentina and Russia.

The bank plans to start eliminating jobs during the week of January 22, with completion expected by the end of the first quarter. The restructuring is expected to yield annual savings of $1 billion, primarily through the elimination of 5,000 managerial positions.

“We are moving quickly, but we are doing it thoughtfully,” said CEO Jane Fraser in a memo to employees. She also reiterated her commitment to improving the bank’s return on tangible common equity, targeting at least 11% by 2027.

Overall, the restructuring and job cuts are expected to reduce Citigroup’s headcount by 60,000, bringing it down to 180,000 by the end of 2026. This includes the departure of 40,000 employees following the IPO of its consumer banking businesses in Mexico.

Citigroup’s fourth-quarter results reflected a loss of $1.8 billion, or $1.16 per share, including several one-time charges. These charges included a $780 million severance expense for employees affected by the restructuring. The bank also recorded a $1.7 billion charge in operating expenses for the quarter, partly due to a special assessment to replenish the Federal Deposit Insurance Corp.’s reserves after several bank failures last year.

These developments in the financial sector, particularly at Citigroup, may impact related stocks such as Bank of America Corp. (NYSE: BAC) and Wells Fargo & Co. (NYSE: WFC), as well as ETFs like the Financial Select Sector SPDR Fund (NYSE: XLF) and Vanguard Financials ETF (NYSE: VFH).

In conclusion, Citigroup’s decision to cut 20,000 jobs is part of a larger restructuring plan aimed at improving the bank’s performance and reducing expenses. While the bank expects significant savings, it also anticipates incurring costs in the short term. CEO Jane Fraser remains committed to achieving better returns and believes that 2024 will be a turning point for the bank.

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