Citigroup Inc (NYSE:C). has unveiled a major restructuring plan that will incur about $1 billion in related costs by the end of the first quarter of next year, as announced by CFO Mark Mason at the Goldman Sachs U.S. Financial Services Conference. The overhaul aims to streamline the bank's management structure, reducing the number of layers from thirteen to eight, in a bid to meet an ROTCE (return on tangible common equity) target of 11%-12%.
The restructuring initiative is part of Citigroup's broader strategy to lower annual expenses to a range between $51 billion and $53 billion. However, despite these cost-cutting efforts, the bank's estimated expenses for 2023 are projected to remain steady at around $54 billion before taking into account a special assessment by the Federal Deposit Insurance Corporation (FDIC).
In an October earnings call, CEO Jane Fraser outlined the necessity of this transformation to enhance profitability and reduce bureaucratic inefficiencies. She credited the bank's third-quarter profitability to increased trading revenue, investment banking fees, and interest payments. Nonetheless, Citigroup's revenue projections for 2023 are on the lower end at approximately $78 billion, influenced in part by Argentina's economic challenges.
The restructuring plan has already led to severance costs totaling $600 million over three quarters, with additional charges expected in the fourth quarter.
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