(Bloomberg) --Citigroup said it will eliminate 20,000 roles in a move that will save it as much as $2.5 billion as part of Chief Executive Officer Jane Fraser's quest to boost the Wall Street giant's lagging returns.
Firmwide expenses are expected to drop to a range of $51 billion to $53 billion over the medium-term, Citigroup said. In the meantime, though, the firm expects to incur as much as $1 billion in expenses tied to severance payments and Fraser's broader overhaul of the bank.
The outlook for cost savings helped mask a disappointing fourth quarter, when Citigroup's fixed-income traders turned in their worst performance in five years as the rates and currencies business was stung by a slump in client activity in the final weeks of the year. Revenue from the business slumped 25% to $2.6 billion.
"The fourth quarter was very disappointing," Fraser said in the statement. "Given how far we are down the path of our simplification and divestitures, 2024 will be a turning point."
Shares rose less than 1% in New York. That's after falling 1.8% on Thursday, after the bank reported billions in one-time charges from its restructuring and exposure to troubles in Argentina and Russia.
Fraser in September initiated the biggest restructuring of Citigroup in decades as she seeks to improve the bank's returns. She has said the moves will allow the bank to eliminate bureaucracy, slimming it down from 13 management layers to just eight.
Fraser has also said the overhaul would help her boost a key measure of profitability known as return on tangible common equity to at least 11% by 2027 at the latest. She reiterated that medium-term guidance on Friday.
As it has sought to increase those returns, Citigroup decided to shutter its municipal business and distressed-debt trading unit, just as rival JPMorgan Chase invests further in the latter area. The bank is prepared to exit additional businesses within its markets division if they "don't make sense for the go-forward strategy," Chief Financial Officer Mark Mason said on a call with reporters.
The fixed income division faced a slew of headwinds in the final weeks of the year, Mason said, noting there was very little volatility in currencies and commodities.
Ultimately, firmwide headcount will decline by 60,000 jobs to 180,000 by the end of 2026, Mason said. That includes the 20,000 roles that will be eliminated as part of Fraser's broader overhaul as well as 40,000 staffers that will depart when Citigroup lists its consumer, small business and middle-market banking businesses in Mexico in an initial public offering.
Citigroup's results for the fourth quarter swung to a $1.8 billion loss, or $1.16 a share. That included a number of one-time items, including a $780 million charge tied to the severance the bank offered to employees impacted by the restructuring. The company also recorded a $1.7 billion charge to operating expenses in the quarter to cover a special assessment to replenish the Federal Deposit Insurance Corp.'s coffers after a series of bank collapses last year.
Costs for the year ahead should be in the range of $53.5 billion to $53.8 billion — a decrease from the $56.4 billion the firm spent in 2023.
