Citi profit drops as costs rise for employee severance, deposit insurance

By Manya Saini and Tatiana Bautzer
(Reuters) -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, or $1.58 per share, in the three months ended March 31, the bank said on Friday. That compares with $4.6 billion, or $2.19 per share, a year earlier.
"Last month marked the end to the organizational simplification we announced in September," CEO Jane Fraser said in a statement. "The result is a cleaner, simpler management structure that fully aligns to and facilitates our strategy."
Citi expects a headcount reduction of 7,000 and $1.5 billion in annualized savings from reorganization, the lender said in its investor presentation. Shares rose 1% before the bell.
The bank also paid $251 million into a Federal Deposit Insurance Corp (FDIC) fund that was drained last year after three regional lenders failed.
Revenue fell 2% 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.
It forecast revenue between $80 billion to $81 billion for 2024, about 1.8% to 3% higher than $78.5 billion in 2023.
Performance at Citi's services and banking divisions stood out.
Revenue from the business that provides cash management, clearing and payments services for the world's biggest corporations rose 8% to $4.8 billion, buoyed by an 18% jump in securities services revenue to $1.3 billion.
Meanwhile, a resurgence in capital markets and investment banking fees fueled a 49% surge in banking revenue to $1.7 billion. Corporate lending rose 34%.
Markets were a sore spot. Trading revenue fell 7% to $5.4 billion, dragged lower by fixed income and currencies.
Wealth management revenue shrank 4% to $1.7 billion.
While Citi's consumer banking division grew revenue, it also stockpiled more money to cover potential losses from customers who default on their loans.