Citi starts to outline the cost of its organizational overhaul

Nathan Howard/Bloomberg

Citigroup is providing more specificity about how much money its latest reorganization is going to cost.

At an industry conference Wednesday in New York City, Citi Chief Financial Officer Mark Mason said the company expects to book "a couple of hundred million dollars" of restructuring charges in the fourth quarter as part of its management simplification program.

For the full year, Citi is probably going to spend around $1 billion on "repositioning and restructuring charges," with a large part of the restructuring costs tied to the management reduction initiative, Mason said.

In October, the $2.4 trillion-asset bank disclosed that it had spent about $600 million so far in 2023 on severance packages, which related to a headcount reduction of about 7,000.

Citi announced its sweeping organizational overhaul in September, saying it would strip out layers of leadership, as well as affiliated support teams, to create a leaner, flatter company. Company executives have said they are working toward reducing the number of management layers from 13 to eight.

Until Wednesday, Citi executives hadn't said much about the financial cost of the reorganization. While Mason provided some information at the Goldman Sachs U.S. Financial Services Conference, the company still has not said how many jobs will be eliminated, how much money the company expects to spend on severance packages or how much it will ultimately save by reducing the size of its workforce, which totaled 240,000 employees about a year ago.

Citi CEO Jane Fraser has called the reorganization her biggest move yet in the bank's top job. 

The first major step came in September when the leaders of Citi's five core businesses — markets, business banking, wealth management, U.S. personal banking and treasury, trade and securities services — joined Citi's executive management team and began reporting to Fraser. That eliminated Citi's two main operating units and the heads of those units.

Last month, Citi announced a round of job cuts and managerial reductions, which Fraser had warned were coming. The company declined to comment on a Bloomberg News report saying that more than 300 senior manager roles, or about 10% of the jobs at that level, had been eliminated.

Citi executives have said that additional managerial changes will "cascade" down the company, with more job cuts and leadership changes happening through the end of the first quarter of 2024.

Citi is "on track" to complete the remaining phases of the reorganization by March 30, Mason said Wednesday. "This is an important work towards simplification" and cost savings, he said.

Citi's fourth-quarter expenses will likely be about $14.2 billion, Mason said Wednesday. All told, this year's total noninterest expenses should be around $54 billion, in line with an earlier projection.

"I'm sticking to that guidance," Mason said.

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Expenses are likely to start ticking down in the back half of next year, Mason predicted. The company has three levers to pull to reduce costs in the medium term: the management simplification plan, the ongoing overhaul of its risk management and compliance systems and the divestitures of 14 overseas consumer franchises, the bulk of which have been completed.

All three initiatives "in varying degrees will play out over the next couple of years and beyond," Mason said.

Excluding the impact of the overseas divestitures, full-year revenues will likely be around $78 billion, which is on the lower end of the range that Citi previously projected, in part because of a decline in trading income, Mason said.