In a significant move, Citigroup, the US multinational investment bank, is set to cut a staggering 20,000 jobs over the next two years, marking its most extensive downsizing effort in over a decade. The decision comes in the aftermath of the bank reporting its worst quarter performance in 14 years.
Chief Financial Officer Mark Mason confirmed that the global workforce of 239,000 will witness a reduction of approximately 8% through 2026. This substantial downsizing is part of a comprehensive restructuring initiative aimed at streamlining operations.
Furthermore, Citigroup plans to exclude 40,000 jobs when it undergoes the spin-off and listing of its Mexican consumer unit, Banamex, in the forthcoming initial public offering. The ultimate goal is to achieve a staffing level of 180,000 employees. Mason highlighted that additional organizational changes are expected to be announced during the last week of January.
CEO Jane Fraser emphasized that the ongoing efforts to simplify the bank's structure are set to conclude this quarter, resulting in savings of $1 billion and the elimination of about 5,000 mostly managerial roles. The overall cost of the job cuts is estimated to be as high as $1.8 billion, but the bank anticipates annual savings of $2.5 billion by 2026.
Citigroup reported a significant setback with a $1.8 billion loss in the fourth quarter of 2023, attributed to $3.8 billion in charges. These charges encompass reorganization expenses, a reserve related to currency devaluations, and instability in Argentina and Russia. Additionally, a $1.7 billion payment was made to replenish a government deposit insurance fund.
Addressing the disappointing performance, the CEO stated, "The fourth quarter was very clearly disappointing. We know that 2024 is critical."
The bank's revenue experienced a 3% decline to $17.4 billion in the quarter compared to the previous year. Notably, this quarter marks the first time the bank has broken out earnings for its five businesses — services, markets, banking, US personal banking, and wealth — which were previously housed under broader divisions.
Despite the significant staff cuts, CFO Mason assured that the restructuring would not negatively impact the revenue growth of the lender. The revenue from the markets, or the trading division, witnessed a substantial drop of 19% to $3.4 billion from the previous year. However, in US personal banking, revenue saw a contrasting trend, climbing 12% to $4.9 billion, primarily driven by retail banking and credit cards.
Looking ahead, Citigroup anticipates reporting charges between $700 million and $1 billion this year related to severance costs and the ongoing organizational reconfiguration. The bank is taking these bold steps to navigate the challenging financial landscape and position itself for a more robust future.