Citigroup's Strategic Transformation and Financial Performance in 2023
2024-01-24
Citigroup's fourth-quarter 2023 earnings call was hosted by Jen Landis, the head of Citi's investor relations. At the beginning of the call, Landis cautioned that the presentation may contain forward-looking statements, which were subject to uncertainty and changes in circumstances. The CEO of Citigroup, Jane Fraser, addressed the call and acknowledged that the fourth quarter of 2023 had been a disappointing one for the company. However, she emphasized the progress made by Citigroup throughout the year in terms of simplifying the organization and executing their strategy.
One notable achievement highlighted by Fraser was Citigroup's maintenance of its No. 1 ranking in TTS among large institutions in 2023. Additionally, the company added an estimated $21 billion in net new assets in wealth, indicating growth in that area. As part of the organization's simplification efforts, Citigroup plans to eliminate approximately 5,000 roles, resulting in over $1 billion of run-rate savings. Looking ahead to 2024, the company's priorities include delivering their medium-term targets and continuing their transformation.
During the call, Citigroup also addressed questions regarding their efforts to improve efficiency and reduce costs. The company is implementing measures such as simplification, leveraging the benefits of transformation, addressing stranded costs, and other productivity efforts. These initiatives aim to eliminate 20,000 positions (excluding Mexico) and achieve over $2 billion in run-rate savings. By simplifying their operations, Citigroup aims to become more client-focused and less bureaucratic.
The call also shed light on Citigroup's focus on achieving its medium-term revenue target by capitalizing on the synergies between its five businesses. A key component of this strategy is the role of the chief client officer, who ensures that the company is disciplined in bringing the full power of its franchise to its clients. Citigroup has already completed the divestiture of nine out of its 14 international consumer franchises and is exiting marginal businesses to concentrate on its core strengths. The company is also investing in technology and digital capabilities to stay competitive in the market.
Financial performance was another topic discussed during the call. Citigroup provided insights into the impact of notable items on their fourth-quarter financial results. These items included the FDIC special assessment, restructuring charge, currency devaluation in Argentina, high interest rates, and reserve build related to transfer risks associated with exposures to Russia and Argentina. The company reported a net loss of $1.8 billion for the fourth quarter, with expenses totaling $16 billion. The cost of credit for the quarter amounted to approximately $3.5 billion.
The call also delved into Citigroup's performance in different business segments. The Services business reported revenues of $18.1 billion for the full year, driven by both rates and business actions. However, Markets revenues decreased due to lower volatility and a significant slowdown in December. Banking revenues were also down, primarily due to the mark-to-market on loan hedges and a decrease in corporate lending. Wealth revenues decreased as well, attributed to a shift in the deposit mix toward higher-yielding products. On a positive note, USPB revenues increased by 14% to $19.2 billion.
Risk management and financial profile were important aspects addressed during the call. Citigroup emphasized its conservative reserve profile and the reduction of risk of loss related to Russia and Argentina. The level of non-accrual loans was reported to be 63 basis points of total corporate loans, indicating a relatively low level of risk. The company expressed confidence in the quality and mix of its portfolio, particularly highlighting its strong financial profile in Argentina. Citigroup's total balance sheet size was stated as $2.4 trillion, with the majority of deposits being institutional and operational in nature. The company's LCR (Liquidity Coverage Ratio) was reported as 116%, indicating a healthy liquidity position. Additionally, its tangible book value per share was $86.19.
In conclusion, the earnings call provided valuable insights into Citigroup's performance, strategy, and financial outlook. The company's focus on simplification, cost reduction, revenue growth, and risk management underscores its commitment to achieving its medium-term targets and delivering value to its clients and shareholders.