Citigroup witnessed a dip in its first quarter profits due to increased severance payments for terminated employees and the replenishment of a government insurance fund for deposits. The bank reported on Friday that net income slipped to $3.4 billion (£3 billion), or $1.58 (£1.40) per share, in the quarter ending 31 March. This stands in contrast with $4.6 billion, or $2.19 per share, recorded in the corresponding period last year.
In the preceding month, Citigroup gave notice to its Dublin-based personnel about its intent to axe jobs, as 168 Irish positions stand vulnerable amid a worldwide effort to reduce expenses. Citibank Europe, the bank’s European hub situated in Dublin, currently employs around 3,000 individuals in the republic.
Jane Fraser, CEO of the company, commenced an extensive restructuring in September to streamline the bank and enhance performance. Expenses surged to $14.2 billion as a result of the costs associated with this restructuring.
The most significant wave of personnel changes, encompassing shift changes and exits, were communicated to employees towards March’s end.
The bank also contributed $251 million to a Federal Deposit Insurance Corp fund that ran dry last year due to the failure of three local lenders.
Despite a 2 per cent drop, reaching $21.1 billion, in the first quarter revenue on a reported basis, it increased if unique items such as the disposal of businesses last year are excluded.
On Friday, competitor JPMorgan Chase disclosed improved first-quarter profits, while Wells Fargo’s profit for the same period contracted due to decreased earnings from customer interest payments.
In the last quarter, Citigroup reported a deficit of $1.8 billion as extraordinary items affected profits.
“Recent months have been challenging,” Ms Fraser admitted in March. “Indeed, far from simple. The escalation we initiated constitutes the most notable modifications most of us at Citi have ever witnessed, bolstering our proactive approach and augmenting our competitiveness,” she stated.
Since the refurbishment initiated in September, shareholders have endowed Ms Fraser with a boost in share price and now anticipate growth in wealth management and investment banking.
So far this year, the bank’s shares have appreciated by 18 per cent, outperforming its rivals and surpassing the benchmark S&P 500.
Citibank is currently grappling with various issues such as a discontented workforce and regulatory hurdles. Recently, in February, U.S. regulators recommended urgent alterations to Citibank’s manner of calculating the default risk connected to its trading associates, as reported by Reuters.
The issues that Citibank needs to address are outlined in two enforcement orders delivered in 2020, from the Office of the Comptroller of the Currency and the US Federal Reserve. As per the directives stated in the consent orders, the bank is required to rectify the identified shortcomings in areas like risk management, internal controls and data administration. This information comes courtesy of Reuters.