Citigroup Plans Major Restructuring Amid Inflation Pressure on US Consumers

Citigroup Inc is embarking on a major restructuring plan that includes downsizing, as CEO Jane Fraser announced recently. The bank’s detailed strategy is expected to be revealed in their reports scheduled for release in January. This move is a response to financial challenges faced by U.S. consumers, particularly those with lower credit scores, whose pandemic-era savings are now diminishing due to rising inflation.

In a recent CNBC interview, Fraser highlighted how inflation has increased spending on essential goods for these consumers. She also acknowledged the Federal Reserve’s role in managing inflation and hinted at a possible interest rate hike in November.

The additional savings many individuals accumulated during the COVID-19 pandemic provided a temporary cushion, but as this financial buffer dwindles, it has exacerbated monetary strain, especially for those with lower credit ratings. This ongoing situation has contributed to Citigroup’s decision to restructure.

Current data shows that Citigroup has a market capitalization of approximately $79.7 billion, with a price-to-earnings ratio of 6.54, indicating it trades at a relatively low earnings multiple. The bank has reported a revenue decline of 1.13% and a quarterly revenue drop of 3.04% for the second quarter of 2023. This situation suggests the bank’s earnings and cash flow are under pressure, raising concerns about potential dividend cuts.

Citigroup’s stock has experienced notable volatility, achieving a total return of 1.54% over the past year but declining by 5.92% year-to-date. These fluctuations place the stock near its 52-week low.

Fraser’s remarks highlight the broader economic challenges facing banks as they adapt to an environment characterized by inflation and potential interest rate increases. As Citigroup gears up for its restructuring plans, many are anticipating the bank’s upcoming January reports for further insight into its strategies and forecasts.

Despite these difficulties, Citigroup has maintained consistent dividend payments for 13 years, currently yielding 5.15%. Analysts predict that the bank will remain profitable in the current fiscal year.

This article was generated with AI assistance and has been reviewed by an editor.