Why did Citigroup report a net loss in the fourth quarter of 2023?

The loss was driven by about $4.7 billion of pre-tax notable items, including the FDIC special assessment, a reserve build for transfer risk in Russia and Argentina, the revenue impact of the Argentine peso devaluation, and a restructuring charge tied to the company's simplification. Higher operating expenses (up 23% reported) and higher cost of credit also weighed on results, while Markets revenue fell sharply in December.

What do the adjusted results look like without the notable items?

Management said Q4 diluted EPS excluding notable items would have been $0.84, compared with the reported loss of $(1.16). Excluding the FDIC assessment and divestiture-related costs, expenses rose 10% to $14.2 billion, largely due to the restructuring charge. These are non-GAAP measures that management argues better reflect underlying performance.

Is Citigroup's capital position still strong after the quarterly loss?

Yes, by regulatory standards. The CET1 ratio was 13.3% (preliminary), down from 13.6% in Q3 because of the loss, dividends, buybacks and higher risk-weighted assets, but up from 13.0% a year earlier. The supplementary leverage ratio was 5.8%. Management noted that excluding certain CECL transition deferrals, the CET1 ratio would be 13.2% on a fully reflected basis.

What are the main risks investors should watch in 2024?

Key risks include elevated credit costs (cards losses have returned to pre-Covid levels and non-accrual corporate loans rose 68%), continued exposure to Russia and Argentina, weaker Markets and Wealth revenues, potential proposed Basel III Endgame capital changes, and execution risk in the Mexico divestiture and broader transformation. Forward-looking statements in the release note these uncertainties.

CITIGROUP INC 8-K: Earnings & Results

01—Abstract

Summary

Summary of the 8-K filed January 12, 2024. Cited figures are marked; the original filing is the authoritative source.

Citigroup reported a fourth-quarter 2023 net loss of $(1.8) billion, or $(1.16) per diluted share, on revenues of $17.4 billion^a, versus net income of $2.5 billion ($1.16 per diluted share) a year earlier.

The result was driven by four notable items totaling roughly $4.7 billion^b pre-tax (about $2.00 per share): an approximately $1.7 billion FDIC special assessment, a $1.3 billion reserve build tied to transfer risk in Russia and Argentina, an approximately $880 million revenue hit from the Argentine peso devaluation, and a roughly $780 million restructuring charge. Excluding these items, diluted EPS would have been $0.84. For full-year 2023, net income was $9.2 billion on revenues of $78.5 billion, down from $14.8 billion in 2022, with full-year EPS of $7.00 versus $4.04 in the Form 8-K's comparison column (the filing's per-share figures for the year are shown on a diluted basis in the supplement).

Capital and shareholder returns remained solid despite the quarterly loss. The CET1 ratio was 13.3% (preliminary), down from 13.6% in the prior quarter but up from 13.0% a year earlier, and book value per share rose 5% year over year to $98.71^c while tangible book value per share rose 6% to $86.19. Citi returned about $6 billion to shareholders in 2023 through dividends and buybacks, including about $1.5 billion in the fourth quarter.

Management characterized 2023 as a year of substantial progress on simplification, with five core businesses now reported, and framed 2024 as a "turning point" in which the company can focus on operating performance. Underlying trends were mixed. Services revenue grew 6%^d in the quarter and 16% for the year, USPB revenue grew 12% and Investment Banking fees rose 16% year over year.

Offsetting this, Markets revenue fell 19%, Wealth revenue fell 3%, and cost of credit nearly doubled to $3.5 billion, with card net credit losses back at pre-Covid levels. Non-accrual corporate loans rose 68% year over year. Expenses increased 23% reported, or 10% excluding the FDIC assessment and divestiture costs.

02—Key points

Key Highlights

Q4 2023 net loss of $(1.8)B, or $(1.16) per diluted share, versus net income of $2.5B ($1.16/share) in Q4 2022; excluding notable items, EPS would have been $0.84.
Notable items reduced Q4 EPS by about $2.00 and totaled roughly $4.7B pre-tax: FDIC special assessment (~$1.7B), Russia/Argentina transfer-risk reserve build ($1.3B), Argentine peso devaluation revenue hit (~$880M), and restructuring charge (~$780M).
Full-year 2023 net income of $9.2B on revenues of $78.5B (up 4%), versus $14.8B net income in 2022; full-year RoTCE fell to 4.9% from 8.9%.
CET1 ratio of 13.3% (preliminary) versus 13.0% a year earlier, with book value per share up 5% to $98.71 and tangible book value per share up 6% to $86.19.
Returned about $6B to shareholders in 2023 via dividends and buybacks (about $1.5B in Q4), a 76% payout ratio.
Cost of credit rose to $3.5B in Q4 from $1.8B a year earlier; total ACL reached $21.8B and non-accrual loans rose 31% year over year to $3.2B.
Segment divergence: Services (+6% Q4, +16% FY) and USPB (+12%) and Investment Banking (+27% Q4) grew, while Markets (-19%) and Wealth (-3%) declined.

03—Questions

Frequently Asked Questions

Why did Citigroup report a net loss in the fourth quarter of 2023?
The loss was driven by about $4.7 billion of pre-tax notable items, including the FDIC special assessment, a reserve build for transfer risk in Russia and Argentina, the revenue impact of the Argentine peso devaluation, and a restructuring charge tied to the company's simplification. Higher operating expenses (up 23% reported) and higher cost of credit also weighed on results, while Markets revenue fell sharply in December.
What do the adjusted results look like without the notable items?
Management said Q4 diluted EPS excluding notable items would have been $0.84, compared with the reported loss of $(1.16). Excluding the FDIC assessment and divestiture-related costs, expenses rose 10% to $14.2 billion, largely due to the restructuring charge. These are non-GAAP measures that management argues better reflect underlying performance.
Is Citigroup's capital position still strong after the quarterly loss?
Yes, by regulatory standards. The CET1 ratio was 13.3% (preliminary), down from 13.6% in Q3 because of the loss, dividends, buybacks and higher risk-weighted assets, but up from 13.0% a year earlier. The supplementary leverage ratio was 5.8%. Management noted that excluding certain CECL transition deferrals, the CET1 ratio would be 13.2% on a fully reflected basis.
What are the main risks investors should watch in 2024?
Key risks include elevated credit costs (cards losses have returned to pre-Covid levels and non-accrual corporate loans rose 68%), continued exposure to Russia and Argentina, weaker Markets and Wealth revenues, potential proposed Basel III Endgame capital changes, and execution risk in the Mexico divestiture and broader transformation. Forward-looking statements in the release note these uncertainties.

04—Continue

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