The devaluation and the Argentine crisis cause multimillion-dollar losses for Citigroup

Citigroup is going to take advantage of the results of the fourth quarter of 2023 to clean up its balance sheet. Among the write-offs and provisions for some 3.7 billion dollars that it is going to make in its accounts, which it plans to publish this Friday, there are 1.6 billion dollars (about 1.46 billion euros) related to Argentina, according to the documentation that was registered this Wednesday with the United States Securities and Exchange Commission (the SEC).

The US bank attributes write-downs of 1.3 billion to “transfer risk associated with exposures outside the United States, driven by safety and soundness considerations under US banking legislation,” of which 720 million correspond to Argentina and 580 million to Russia. . In the Argentine case, Citigroup speaks specifically of “cross-border and cross-currency exposures in Argentina, based on prevailing economic trends, currency devaluation and geopolitical risk that may impact Argentina's ability to sustain external debt service.” ”.

Furthermore, although it had already referred to it, Citi now specifies that it “recorded a translation loss of approximately $880 million in revenue in Argentina in the quarter, as a result of the recent devaluation of the Argentine peso.” This decrease in revenue affected the Services, Markets and Banking segments. Citi also generated net interest income of approximately $250 million on its net investments in Argentina in the fourth quarter of 2023, which are not included in that figure.

After coming to power by winning the elections, the new president, Javier Milei, approved a 50% devaluation of the Argentine peso. The Government proposes a phase of harsh adjustment in the Argentine economy. In its latest quarterly report, referring to the third quarter of last year, The bank estimated its investment in Argentina, where it operates in wholesale banking, at around 1.9 billion dollars. In it he warned that if the official exchange rate was devalued until it was close to the market rate, he would suffer significant losses.

Other games

Apart from the devaluation and the crisis in Argentina and Russia, Citi's results for the fourth quarter will be affected by other write-downs. The bank had already talked about these items in the past, but now the amounts have been finalized and the bank is taking the opportunity to accumulate them all at the end of a year that had already been rather discreet in terms of results.

Citi has recorded an approximate charge of $1.7 billion to operating expenses in the quarter related to the special assessment of the Federal Deposit Insurance Corporation (FDIC) as part of the bill that corresponds to the entity for the banking crisis of the year past and which involved the rescue of several banks. The bank had initially estimated the figure at up to $1.5 billion in its third-quarter accounts and then raised the estimate to $1.65 billion during a recent investor presentation.

Additionally, the bank recorded approximately $780 million in restructuring charges in the quarter, largely driven by severance, non-cash asset impairments and other related charges, as part of Citi's implementation of its simplification initiatives. organizational and administrative beginning at year-end 2023. CEO Jane Fraser is attempting to streamline and increase Citigroup's profitability, in part by reducing staff and exiting retail businesses around the world.

“These items will be reflected in Citi's results materials for the fourth quarter and full year 2023, which will be published on January 12, 2024,” the bank says in its communication to the supervisory body. That day, JP Morgan Chase, Bank of America and Wells Fargo will also present their accounts.

“While we rarely release quarterly results information ahead of expected earnings announcement dates, we thought this was a prudent step in our commitment to building credibility and being transparent,” wrote Mark Mason, the company's chief financial officer. in a statement cited by Reuters. “The elements we have revealed today do not change our strategy.”

Citigroup sold its retail banking businesses in Argentina in late 2016, amid an effort to streamline its footprint to simplify the bank and reduce costs. The bank's operations in Argentina began in 1914 with its first non-U.S. branch. In 2018, Citigroup Inc. switched its accounting in Argentina to the U.S. dollar after deeming the economy there “highly inflationary.”

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