Citigroup (NYSE:C) reported a drop in profit for the first quarter due to increased spending on severance payments and deposit insurance replenishment.
Net income for the quarter ending March 31 fell to $3.4 billion, or $1.58 per share, compared to $4.6 billion, or $2.19 per share, in the same period last year.
CEO Jane Fraser highlighted the completion of organizational simplification efforts, aiming for a more streamlined management structure aligned with the bank’s strategy.
The bank anticipates a reduction of 7,000 employees and $1.5 billion in annualized savings from reorganization efforts, with shares rising 1% before the bell.
Citigroup also contributed $251 million to a Federal Deposit Insurance Corp (FDIC) fund, replenishing it after the depletion caused by the failure of three regional lenders last year.
While reported revenue dipped 2% to $21.1 billion in Q1, excluding one-time items, it saw an increase from the previous year.
Revenue growth was notable in the cash management, clearing, and payments services, which rose 8% to $4.8 billion, driven by an 18% increase in securities services revenue.
A resurgence in capital markets and investment banking fees led to a 49% surge in banking revenue to $1.7 billion, with corporate lending rising 34%.
However, trading revenue decreased by 7% to $5.4 billion, primarily due to fixed income and currencies, while wealth management revenue shrank by 4% to $1.7 billion.
Citi’s consumer banking division experienced revenue growth but also increased reserves to cover potential loan losses, resulting in credit costs of $2.2 billion.
For the full year, the bank expects expenses between $53.5 billion to $53.8 billion, with repositioning costs and restructuring charges totaling $700 million to $1 billion.
CEO Fraser initiated a comprehensive reorganization in September to enhance the bank’s performance, leading to increased expenses.
Despite challenges, including regulatory issues and workforce concerns, investors have responded positively to the overhaul, with the company’s stock rising by 18% this year.
Citi continues to address regulatory demands, aiming to rectify deficiencies outlined in enforcement actions from the U.S. Federal Reserve and the Office of the Comptroller of the Currency in 2020.
