Citigroup Inc’s Profits Plunge Amid Sluggish Corporate Spending and Lay-offs

Citigroup’s Profits Dip as Corporate Spending Slows and Lay-offs Take a Toll

New York-based bank, Citigroup Inc, experienced a 35% decrease in profits last quarter, attributed to sluggish corporate spending, a lack of deals, and the high cost of laying off employees. The bank reported a net income of $2.9 billion, down from $4.5 billion in the same period last year. Revenues also dipped by 1% to $19.4 billion, amid growing concerns of a US recession.

In particular, Citigroup’s cash management and payment processing unit, which serves corporate clients, experienced a modest 15% revenue growth, less than half of the 32% growth seen in the previous year. The bank, like its competitors, faced the impact of a significant slowdown in dealmaking. Corporate and investment banking revenue plummeted by 44%, while fees from the markets business, involving the trading of stocks and bonds on behalf of clients, fell by 13%.

To address the weakening performance across various divisions, Citigroup announced plans to cut up to 5,000 jobs last month. This restructuring effort led to an increase in expenses by over $1 billion, primarily associated with the lay-offs. While Citi’s CEO, Jane Fraser, acknowledged the challenging macroeconomic environment, she highlighted the benefits of the bank’s diversified business model and strong balance sheet. She expressed disappointment in the quarter’s results due to the prolonged delay in investment banking rebounding.

However, amid the challenging backdrop, Citigroup found a bright spot in the still resilient US consumer market. The bank’s retail credit card business saw a substantial 27% growth in revenue during the period, surpassing Wall Street’s expectations. Looking ahead, Citi anticipates that more of its loans will sour as the Federal Reserve aims to control inflation through interest rate hikes. As a result, the bank’s provision for loan losses rose by nearly 40% to $1.8 billion. Despite this, lending activities remained relatively unchanged from a year ago.

While Citigroup continues to face struggles in regaining its stability, CEO Jane Fraser has implemented a restructuring plan since taking over in 2021. This plan entails exiting underperforming businesses and closing retail branch networks worldwide to reduce costs.

In conclusion, Citigroup’s third-quarter earnings reflect the challenges posed by slower corporate spending, a decline in dealmaking, and the costly layoffs that have impacted the bank’s profitability. Despite the setbacks, the resilience of the US consumer market has provided a silver lining for Citigroup. As the bank moves forward, it remains focused on strengthening its core operations and streamlining its business to navigate the ever-changing financial landscape.