Citigroup profit drops as costs rise for employee severance

Dublin staff were told last month that 168 Irish roles were at risk as part of a global cost-cutting initiative

Citigroup’s profit fell in the first quarter as it spent more on severance payments for laid-off employees and set aside money to refill a government deposit insurance fund.

Net income fell to $3.4 billion (€3.2 billion), or $1.58 (€1.48) per share, in the three months ended March 31st, the bank said on Friday. That compares with $4.6 billion, or $2.19 per share, a year earlier.

Last month Citigroup informed its staff in Dublin of plans to cut jobs, with 168 Irish roles at risk as part of a global cost-cutting initiative. Citibank Europe, which has its European hub in Dublin and employs close to 3,000 people in the Republic.

Company chief executive Jane Fraser began a sweeping reorganisation in September to simplify the bank and improve performance. Costs from the reorganisation pushed expenses up to $14.2 billion.

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The largest round of staffing moves, including reassignments and departures, was communicated to employees in late March.

The bank also paid $251 million into a Federal Deposit Insurance Corp fund that was drained last year after three regional lenders failed.

Revenue fell 2 per cent on a reported basis to $21.1 billion in the first quarter. Excluding one-off items such as the sales of businesses last year, it was higher in the quarter.

Rival JPMorgan Chase reported a higher first-quarter profit on Friday, while Wells Fargo's quarterly profit shrank as it earned less from customer interest payments.

In the previous quarter, Citi had posted a $1.8 billion loss as one-time items dragged down its earnings.

“These past months have not been easy,” Ms Fraser wrote in March. “Far from it. The changes we’ve made are the biggest that most of us have experienced at Citi...putting us on the front foot and improving our competitiveness,” she had said.

Investors have rewarded Ms Fraser with a share price boost since the overhaul began in September. Next, they want to see growth in wealth management and investment banking.

The company’s stock has risen 18 per cent this year, outperforming peers and beating the benchmark S&P 500.

The bank still faces challenges, including regulatory problems and an unsettled workforce. In February, Reuters reported U.S. regulators asked Citigroup for urgent changes to the way it measures default risk of its trading partners.

Citi is working to fix problems laid out in two enforcement actions from the US Federal Reserve and the Office of the Comptroller of the Currency from 2020.

The consent orders direct the bank to repair deficiencies in its risk management, data governance and internal controls. – Reuters

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