Citigroup's $400M Q2 Expense Spike: Result of Job Cuts and Reduced Trading Activity, Says CEO

At a Morgan Stanley conference, Citigroup Inc's C CEO Mark Mason said that recent job cuts at the firm would cost up to $400 million this quarter compared to the first three months of the year. 

The cuts primarily affected the investment banking and trading divisions, resulting in severance costs for approximately 1,600 employees in the second quarter. 

Mason mentioned that the firm had already set aside severance funds for around 5,000 employees affected by the job cuts this year. Despite the expenses, Citigroup says it remains committed to managing costs by reducing headcount when necessary.

In addition, Mason cautioned that trading revenue has declined by 20% in the current quarter due to the Congressional debate surrounding the debt ceiling, which negatively impacted client activity throughout most of the period. 

Similarly, revenue from the investment-banking division dropped by approximately 25%, in-line with industry trends. 

Mason attributed these declines to concerns over the debt ceiling, particularly during April and May, and stated that there has been no significant increase in volatility or activity in the early days of June.

Last week, Citigroup disbanded its CitiFX global FX strategy team responsible for providing commentary and analysis on foreign exchange (FX) markets. It also disbanded its Latin America corporate bond trading team due to tightening liquidity and reduced issuance.

Last month, Citigroup announced its plans to sell shares of its Banamex unit through an initial public offering, ending discussions for a potential sale to a local buyer that faced complications from Mexico's president, Bloomberg reported. 

This decision allowed Citigroup to resume stock buybacks in the current quarter. Mason stated that the firm expects to repurchase approximately $1 billion in shares during this period.

Price Action: C shares are down 0.39% at $48.05 premarket on the last check Thursday.