Finance

Exports rose by 2.3% year on year in U.S. dollar terms last month, more than the 1.7% increase forecast by a Reuters poll.
Imports rose by 0.2% in December from a year ago in U.S. dollar terms. That’s slightly less than the 0.3% increase analysts polled by Reuters had expected.

Containers sit at the Yangshan Port in Shanghai, China, Aug. 6, 2019.
Aly Song | Reuters

BEIJING — China’s annual exports fell for the first time in seven years in 2023, even as shipments in December beat expectations, customs data showed Friday.
Exports rose by 2.3% year on year in U.S. dollar terms last month, more than the 1.7% increase forecast by a Reuters poll.

Imports rose by 0.2% in December from a year earlier in U.S. dollar terms. That’s slightly less than the 0.3% increase expected by analysts polled by Reuters.
But for 2023, exports fell 4.6%, the first such annual drop since a 7.7% decline in 2016, according to Wind Information.
Imports dropped by 5.5% last year. Their last decline was in 2020, the year the Covid-19 pandemic began.
China’s trade with its major partners declined in 2023 as demand for Chinese goods fell amid slower global growth.

The Association of Southeast Asian Nations was China’s largest trading partner on a regional basis in 2023, followed by the European Union.

By country, the U.S. remained China’s largest trading partner.
Russia was a rare bright spot, with China’s exports to the country climbing nearly 47% in 2023, and imports rising almost 13%.
“Chinese manufacturers anticipate production to rise over the course of 2024 amid forecasts of firmer global demand, higher client spending and new product investment,” Caixin said in a release for its December manufacturing purchasing managers’ index.
The index showed mild improvement from November. “However, the degree of optimism softened from November and remained below the series average.”

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The report also noted a decline in the employment sub-index. “Firms often mentioned that they had opted not to replace voluntary leavers or trimmed headcounts as demand was more subdued than expected,” Caixin said.
“Our base case is for exports to rise 2% in 2024 after falling 5% [in 2023]. If exports slow more than expected, policymakers would turn more proactive in terms of domestic policy supports,” Macquarie’s Chief China Economist Larry Hu said in a Jan. 5 report.
China’s economy has seen a slower-than-expected recovery from the pandemic, but likely ended 2023 with around 5% growth. The National Bureau of Statistics is scheduled to release the official GDP numbers on Wednesday.

“Weak domestic demand drives competitive firms in China to expand in the global market. This helps to contain inflation in the rest of the world,” Zhiwei Zhang, president and chief economist at Pinpoint Asset Management, said in a note.
“But exports as a pillar for growth in China is not strong enough to boost overall domestic demand,” he said. “The support from fiscal policy expansion is critical.”
China, the world’s largest oil importer, said its crude oil demand fell 7.7% in 2023. However, it fell less than the 8.1% drop in November.

Imports of integrated circuits also picked up in December.
China’s exports in most product categories fell in 2023, with machinery, boats and home appliances among the few exceptions.
Autos remained a bright spot, with exports surging by 69% in 2023 from a year ago, China customs data showed. That was a slightly slower pace than the 70.9% increase in the January 2023 to November period.

China is expected to have surpassed Japan as the world’s largest exporter of cars in 2023.
Rapid growth in the electric car market as well as demand from Russia have helped boost China’s auto exports, said Sarah Tan, economist at Moody’s Analytics.
“After Russia’s invasion of Ukraine in February 2022, many auto manufacturers had left the country only to have that gap filled by Chinese manufacturers,” she said in an email. “In the first eleven months of 2023, auto shipments to Russia rose about six times that of 2022 in value terms.” More

The consumer price index, a key inflation gauge, rose 3.4% in December 2023 on an annual basis, the U.S. Department of Labor reported.
That’s up from recent months, but those figures mask disinflationary pressure under the surface, economists said.
Inflation has declined substantially from its 9.1% peak during the Covid-19 pandemic era.

Consumers shop in Rosemead, California, on Dec. 12, 2023.
Frederic J. Brown | Afp | Getty Images

The annual inflation rate edged higher in December following two months of declines. However, that reversal likely isn’t cause for concern — and may be somewhat misleading, economists said.
“We’re still making progress in the inflation fight,” said Sarah House, senior economist at Wells Fargo Economics.

The consumer price index rose 3.4% last month relative to a year earlier, the U.S. Department of Labor reported Thursday. That’s a larger increase than the 3.1% in November and 3.2% in October.

The index has fallen by half since December 2022 — when the inflation rate was 6.5% — and has declined significantly from the 9.1% pandemic-era peak in June 2022.
Consumers’ buying power also increased over the past year. Hourly wages after accounting for inflation — so-called “real earnings” — rose 0.8% from December 2022 to December 2023, according to the Labor Department.

Inflation is ‘moving in the right direction’

The CPI, a key inflation gauge, measures how fast the prices of everything from fruits and vegetables to haircuts and concert tickets are changing across the U.S. economy.
Lower energy prices had helped pull down the overall index in recent months but didn’t provide as much relief to consumers in December, economists said.

Further, so-called “base effects” made the latest yearly CPI reading seem somewhat distended, economists said. This term refers to how fluctuations in the monthly inflation rate can influence the magnitude of an annual change.
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Basically, there was an “unusually small” monthly increase — 0.1% — in prices from November 2022 to December 2022, said Andrew Hunter, deputy chief U.S. economist at Capital Economics. Meanwhile, CPI rose 0.3% from November 2023 to December 2023 and that difference was enough to increase the year-over-year comparison.  
For this reason, monthly figures often provide a more accurate gauge of inflation trends relative to the annual reading — and the monthly indicators are “still moving in the right direction,” Hunter said.

Where inflation jumped in December

Shelter prices rose 6.2% over the past year. As the largest piece of the average household’s budget, shelter accounted for more than two-thirds of the CPI’s increase since December 2022, according to the Labor Department.
Other categories with “notable” increases during that time include motor vehicle insurance, prices of which jumped 20.3%; recreation, such as admissions to concerts and sporting events, 2.7%; personal care, such as haircuts, 5%; and education costs, such as tuition and daycare, 2.4%, the Labor Department said.

Meanwhile, prices have leveled out — or even declined — in some categories. Largely, that trend has occurred in physical goods such as new and used cars; household furnishings; recreational goods such as toys, televisions and musical instruments; and education and communication commodities such as computers and college textbooks, economists said.
For example, prices of used cars and trucks have decreased 1.3% since December 2022. Those of household appliances fell 4%, while those for dishes and flatware declined 2% and those for men’s suits, sport coats and outerwear fell 6%.
Broadly, that easing is attributable to “an unwinding of the pandemic-era supply shortages,” Hunter said. Supply chain bottlenecks and elevated consumer demand had fueled those shortages.

Meanwhile, seasonally adjusted gasoline prices rose 0.2% from November to December, whereas they’d declined 6% and 5% in November and October, respectively. They’re down 1.9% over the year.
Food inflation has also moderated, as grocery prices rose an annual 1.3% in December compared to 1.7% in November. There have been signs of consumers doing more bargain hunting at grocery stores, which has in turn gotten somewhat more competitive in pricing to woo consumers, House said.
While shelter inflation has been stubbornly high, it’s expected to fall over the coming months since marketplace rents have been flat to down, said Mark Zandi, chief economist at Moody’s Analytics. It takes time for those dynamics to feed through into the Labor Department’s CPI calculations, he said.
“What’s important for most Americans is the cost of staples — the cost of a gallon of regular unleaded gasoline, and food and rent — those things are moving in the right direction,” Zandi said.
While food and housing prices are “still very elevated” relative to two to three years ago, consumers can “take some solace that they’re no longer rising,” he said.Don’t miss these stories from CNBC PRO: More

The Securities and Exchange Commission approved the first-ever spot bitcoin ETFs on Wednesday, paving the way for them to begin trade.
The move will give investors increased ways to gain exposure to bitcoin, which they can now hold via existing financial instruments.
CNBC runs through what you need to know about the new bitcoin ETFs, and why they’re a big deal for investors — and for the cryptocurrency itself.

Chesnot | Getty Images

The U.S. Securities and Exchange Commission just approved the first-ever batch of spot bitcoin exchange-traded funds to come out of the U.S.
The agency gave the green light on Wednesday to sponsors of 10 ETFs, including BlackRock, Invesco, Fidelity, Grayscale, and Ark Invest — paving the way for these funds to begin trading as soon as this week.

The move was largely expected, even after a social media hacking snag. A false statement saying the regulator had approved a bitcoin ETF was published Tuesday on the SEC’s social media account on X, formerly known as Twitter. The agency later clarified that its account had been compromised.
The actual approval Wednesday marked a massive step for the cryptocurrency, as it will give investors increased ways to gain exposure to the token — not just from holding it directly, but via existing financial instruments that trade on a regulated stock exchange.

But what does that all mean exactly, and how does it affect investors? CNBC runs through everything you need to know about the bitcoin ETF milestone.

What’s a bitcoin ETF?

An ETF is an investment fund that tracks the performance of an underlying asset. That could be stocks, a basket of currencies, a precious metal like gold, or, in this case, bitcoin.
It’s a way for investors to get exposure to the value of the underlying asset without directly owning it.

ETFs trade on traditional stock exchanges, and their value should rise when the underlying asset increases in price, or fall if it decreases.
As crypto investors look to assess what the market impact of a bitcoin ETF might be, many are comparing Wednesday’s news to the greenlighting of the SPDR Gold Shares ETF — the first-ever spot gold ETF — in 2004.
The total gold market capitalization was worth around $1 trillion to $2 trillion before the gold ETF was approved, and this subsequently ballooned to $16 trillion in a few years after, according to Vijay Ayyar, vice president of international markets for Indian crypto exchange CoinDCX.
“Bitcoin’s adoption will be much faster and bigger than that,” Ayyar told CNBC via WhatsApp.

Ayyar said the story for bitcoin and crypto will “accelerate” in 2024, as the approval of a spot bitcoin ETF could spark interest from retail investors who were previously sitting on the sidelines.

What does a bitcoin ETF mean for investors?

A bitcoin ETF opens up the audience of people and institutions that can buy and sell bitcoin to those with little experience trading cryptocurrency.
“This ETF has two main impacts: increased distribution in the US (a moderate impact, as there have been ETFs outside of the US for years) and increased credibility of crypto as an ‘asset class’ (a very high impact),” Kevin de Patoul, co-founder and CEO of crypto liquidity provider Keyrock, told CNBC.
“There is now a U.S. bitcoin spot ETF, and bitcoin is no longer considered shady or infamous. This significantly changes the perception for the mainstream public.” 
It also means that bitcoin could start appearing in mainstream portfolios, where many more retail investors can gain exposure.
Big institutional fund managers can add it to their investment funds. Retirement planners can now include it in employer-sponsored 401(k) plans.
This makes it much easier to own bitcoin, as you don’t have to rely on a vulnerable piece of hardware for storage. Investors don’t need to tackle the difference between “hot” and “cold” wallets, which store digital tokens.
Instead, they can just buy an ETF from one of the many regulated asset managers that are set to go live with their own ETFs.

“The approval of a Bitcoin ETF has huge implications for US investors because they can now hold crypto in their brokerage account, which they couldn’t do before,” Timo Lehes, co-founder of blockchain firm Swarm Markets, told CNBC.
“This gives the green light for portfolio diversification into the asset, and we expect major inflows of capital into the market, as a result.”
A bitcoin ETF could bring the cryptocurrency exposure to a more diverse set of holders with different levels of size and experience in the market.
Ayyar said the approvals Wednesday “mark a key moment in the maturity of the crypto asset class.”
“Mass retail now has an easy, safe way to gain exposure to the asset class through their brokerage account,” Ayyar told CNBC.
“The ETF approval also provides a credible stamp of approval for large institutions and market participants that were waiting for an easier way to access the asset class rather than buying crypto directly, which always has inherent price and custody risks.” More

SAN ANSELMO, CALIFORNIA – JUNE 06: In this photo illustration, the Coinbase logo is displayed on a screen on June 06, 2023 in San Anselmo, California. The Securities And Exchange Commission has filed a lawsuit against cryptocurrency exchange Coinbase for allegedly violating securities laws by acting as an exchange, a broker and a clearing agency without registering with the Securities and Exchange Commission. (Photo Illustration by Justin Sullivan/Getty Images)
Justin Sullivan | Getty Images

Shares of Coinbase and Robinhood popped Thursday as traders bet the approval of bitcoin exchange-traded funds in the U.S. would give the cryptocurrency trading platforms a boost in demand.
Coinbase and Robinhood were both up 3.7% in premarket trading.

On Wednesday, the Securities and Exchange Commission approved rule changes that allow for the launching of bitcoin ETFs in the U.S. The news has been long awaited by investors in the crypto space as it is seen as lending more credibility to what has been a volatile industry and asset class.

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“This is a monumental step for the crypto industry,” Coinbase CEO Brian Armstrong told CNBC’s Andrew Ross Sorkin in an interview that aired Thursday. “There’s 52 million Americans who have been using crypto over the past decade, and I think they’ve been waiting for some kind of acknowledgment from the government, and the SEC in particular, that this asset class is here to stay — and they finally got that.”
There is some concern that the advent of a spot bitcoin ETF in the U.S. could put pressure on Coinbase down the road — as it offers investors an easier way to invest in the cryptocurrency. But investors appear to be betting that it will raise interest in the crypto industry as a whole.
To be sure, Coinbase is a custodian of several of the ETFs that are slated to begin trading soon, meaning the company will generate fees from that service.
“We see the impact of a Bitcoin ETF as having both positive and risky elements for Coinbase, but given the appreciation of Coinbase’s stock price, we see the risks as more relevant to shareholders,” JPMorgan analyst Kenneth Worthington wrote.

“On the positive side, we see Coinbase as the custodian of choice for Bitcoin ETFs, with Coinbase hired as the custodian for 8 of the 11 Bitcoin ETFs approved by the SEC in addition to its surveillance sharing agreements,” he said. “We think the approval of the Bitcoin ETFs are potentially a lose/lose situation for Coinbase as we see a Bitcoin ETF, if particularly successful, as a competitor to Coinbase.”
Coinbase is coming off a monster year, rallying 391.4% in 2023. Robinhood also soared more than 56% last year.
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As with every skirmish in America’s culture wars, how you view the ousting of Harvard University’s president has much to do with where you are sitting. Claudine Gay resigned on January 2nd. Progressives see her as a competent administrator who, as Harvard’s first black president, was subjected to a smear campaign. Conservatives, meanwhile, spy a plagiarist who failed to quash antisemitism on campus. Naturally, your columnist—perched at a Bloomberg terminal—views the episode in its true light: as a blood-on-the-carpet coup by an experienced activist investor, disposing of an errant chief executive.The investor in question is Bill Ackman, one of Wall Street’s more outspoken hedge-fund bosses. He is also one of Harvard’s more generous donors, having given it $50m. And he has spent recent months on the warpath, berating the university for failing to protect Jewish students from antisemitic attacks.Then came a congressional hearing in which Ms Gay and two other university presidents prevaricated over whether calling for a genocide of Jews would violate their institutions’ codes of conduct. “The world will be able to judge the relative quality of the governance” at the three schools, Mr Ackman wrote, “by the comparative speed with which their boards fire their respective presidents.” A month on, two of the three are gone.Although Mr Ackman’s fund prefers “quiet, constructive engagements” with the companies it owns, he made his name as a fearsome boardroom brawler. Over the years he has picked high-profile fights with America’s Municipal Bond Insurance Association, the Canadian Pacific railway and Target, a retail giant. Unsurprisingly, then, his most recent campaign bore all the hallmarks of a veteran activist heading into battle—and carries lessons for how to win one.First, and most important, make sure you are in good company. Mr Ackman was just one of many to go after Ms Gay, making the tactics of a successful campaign much easier to deploy. The obvious one is financial pressure: Mr Ackman says he is aware of $1bn-worth of donations being withheld from the university since October 7th. That sort of firepower is a lot easier to muster if you are acting in concert with others. Think of the pack of hedge-fund managers George Soros assembled to short the pound in the 1990s.Strength in numbers also made the second line of attack—forensic analysis of the opponent—more deadly. Activist short-sellers (a group that once included Mr Ackman) obsessively comb through their targets’ accounts; one of them, Carson Block, talks of reading many years of call transcripts, starting with the oldest. In the Harvard mess it was Mr Ackman’s fellow travellers, such as Christopher Rufo, a conservative activist, who trawled through Ms Gay’s work to find lines apparently copied from others without attribution. It was ultimately these accusations of plagiarism that toppled her. While others reviewed the documents, Mr Ackman was freed up to do his own due diligence, meeting hundreds of Harvard students and faculty members to establish how insiders viewed events.No amount of allies, though, can help with the third requirement for an activist campaign: bloody-mindedness. Whatever the target, they are unlikely to be broken by the initial salvo—and may fire back. In 2021 Andrew Left, another short-seller, decided to quit the scene after furious meme-stock investors sent threatening messages to his children. Sure enough, Mr Ackman is now embroiled in a much bigger feud. On January 4th Business Insider, a news site, accused his wife, a former professor at the Massachusetts Institute of Technology, of a “similar pattern of plagiarism” to Ms Gay’s. Suspecting the allegation came from MIT, Mr Ackman responded by promising a plagiarism review of everything published by the university’s president, board and faculty.For all its admirable chutzpah, the escalation points to danger ahead. Mr Ackman began by trying to combat antisemitism at Harvard by unseating a president who seemed soft on it. He now appears to be gearing up for a fight with much of America’s academic establishment over plagiarism, diversity policies and the future path of higher education. This scope may seem plausible to a man who rose to prominence by shorting the American mortgage market. Yet the best activist campaigns have specific aims and endpoints—and tend not to be fought against people with tenure. Even for Mr Ackman, his new venture will prove a tall order. ■Read more from Buttonwood, our columnist on financial markets: Why bitcoin is up by almost 150% this year (Dec 18th)The mystery of Britain’s dirt-cheap stockmarket (Dec 14th)Why it might be time to buy banks (Dec 7th)Also: How the Buttonwood column got its name More

When economists talk about bottlenecks, they typically refer to points in a supply chain that slow down production. The global economy is at present providing a rather literal example of the metaphor. It is as if someone has put a cork in the Suez and Panama canals.In normal times, the canals carry about 10% and 5% of maritime global trade respectively. Now the Panama Canal Authority has capped the number of ships that may traverse its channel, owing to low water levels. Attacks by Houthi militants on ships in the strait of Bab al-Mandab, part of the passage from the Indian Ocean to the Suez Canal, have prompted some of those travelling between Europe and Asia to take the longer route round Africa instead.Given that the rich world at last appears to be defeating inflation, this is making policymakers nervous. Rising shipping prices from mid-2020 to early 2022 coincided with the surge of inflation in the first place. Their subsequent fall coincided with its decline. Since the Houthi attacks on ships began in November, prices have once again jumped. According to the Freightos Baltic Index (fbx) the cost of shipping a standard container rose by 93% in the week to January 9th. Drewry, a consultancy, notes that for the Shanghai to Rotterdam route, which would usually pass through the Suez Canal, the cost jumped by 114% to $3,577 over a similar period.image: The EconomistBut a repeat of pandemic-era inflation is unlikely. The shipping snarl-up is not yet on the same scale as last time (see chart). Although the fbx is rising, it is only at a quarter of the peak reached in 2022. In September 2021 respondents to a survey of purchasing managers conducted by s&p Global Ratings, a data provider, were 17 times more likely than the long-run average to say that shipping costs were contributing to higher prices. In the latest survey they were only three times more likely.Future surveys may well indicate more concern. Annual shipping contracts are typically agreed in March, notes Chris Rogers of S&P, meaning that current rates do not reflect the true cost of transport. If disruption lasts until contracts are renegotiated this could swiftly change, he adds.Ultimately, though, the inflationary impact of bottlenecks reflects the degree of mismatch between supply and demand. Economists at the annual meeting of the American Economic Association, held from January 5th to 7th in San Antonio, Texas, discussed a number of papers on this topic. According to one, presented by Oleg Itskhoki of the University of California, Los Angeles, price growth as a result of bottlenecks during covid-19 was more persistent in America than elsewhere.Other papers suggest why this was the case. One, outlined by Ana Maria Santacreu of the St Louis branch of the Federal Reserve, found that in countries where governments provided more fiscal stimulus, such as America, the post-pandemic reopening did less to alleviate supply-chain bottlenecks than elsewhere. “Supply constraints bind during periods of high demand,” she concluded. Another paper, presented by Callum Jones, an economist on the Federal Reserve’s board, agreed with the conclusion. Bottlenecks explained about half the rise in inflation from 2021 to 2022, his work found, but that was because they exacerbated loose monetary policy.Although difficulties in the Suez and Panama canals echo recent history, the context is very different. Rich-world policymakers are no longer attempting to use fiscal and monetary policy to juice demand. The global economy is also not trying to adjust to a shift from services to goods, which economists considered another culprit for snarled supply chains.In the most recent S&P survey respondents were 50% less likely to point to higher demand as a reason for extra costs than the long-run average; two years ago they were 75% more likely to do so. As a consequence, business leaders are more relaxed about the current crunch. The world’s great shipping canals may be bottlenecks. Fortunately, however, there is not much pressure in the rest of the bottle. ■For more expert analysis of the biggest stories in economics, finance and markets, sign up to Money Talks, our weekly subscriber-only newsletter. More

A new Communist Party slogan was born on January 9th. The phrase, which appeared on the front page of the People’s Daily, a party mouthpiece, defies easy interpretation. A loose translation might read “nine issues that must be grasped”. As is typical of party-speak, it has been abbreviated into a three-syllable catchphrase: jiu ge yi. The issues it refers to include other slogans, such as “breaking free from the historical cycle of rising and falling” and “taking the lead of the great social revolution as the fundamental purpose”. Only by fathoming such principles can one engage in “self-revolution”—yet another slogan, focused on combating corruption.These buzzwords do not roll off the tongue. They are oblique and often resistant to decryption. Normal folk frequently ignore them. They represent, however, the language of party power—”the very currency on which [the party] to a large extent depends”, says David Bandurski of China Media Project, a research group. The jargon sets the tone for economic campaigns. It even defines entire epochs of growth. At a time when China’s leaders are attempting to drag the economy from the doldrums, there is even more reason than normal to pay attention to party-speak.Apparatchiks reserve the right to define their buzzwords. But Xi Jinping, China’s supreme leader, has elevated the importance of ideology in everyday life and business, meaning that economists and industry analysts have spent more time poring over the language, often making interpretations of their own. “Common prosperity”, for example, became the most-discussed phrase of 2021. It was interpreted by some investors as a backlash against the wealthy. Then it seemed to fizzle out. To date, no official definition has been given.“High-quality development” courted similar controversy in the first week of 2024. Its mention in Mr Xi’s New Year’s address, and the fact that he uttered the phrase twice as often in 2023 as in the previous year, according to Bloomberg, a news service, has both pleased and perplexed economists. Some believe that it signals greater investment in advanced technology, which could help stimulate growth. Others think it might de-emphasise China’s traditional growth engines, such as low-end manufacturing, and indicate increased tolerance for slower growth.Such confusion is not enough to stop party-speak spreading. Since Mr Xi first used the words “profound changes unseen in a century” during a policy address in 2018, they have become common in local policy documents. Officials in Hong Kong have started using them. Chinese brokers drop the phrase into notes for clients. Although the term is often thought of as a political buzzword, some experts are now trying to fit it into economic policy. Analysts at CICC, an investment bank, have offered up a succinct definition. According to them the “changes unseen” include “competition among major countries, the outbreak of a once-in-a-century pandemic, climate change and green transformation, the wealth gap and ageing population”. Who knows whether they are right?Many of the party’s phrases have become sweeping ideologies that cover swathes of society and the economy. An increasingly popular one—“national rejuvenation under the new-era system”—is focused on restoring China’s economic and cultural place in the world. Despite this fearsome designation, it can nevertheless be used to explain many positive trends that have taken place under the leadership of Mr Xi, not least China’s rapid economic growth. The “Chinese path to modernisation” is similarly expansive and vague. At a state-organised salon in Shanghai on January 10th, a panel of experts talked at length about how foreign investment, private enterprise and even youth travel all fit into this Chinese path.For the moment, it is unclear what the party has planned for jiu ge yi. It may become part of the war on corruption, says Manoj Kewalramani, who publishes a newsletter interpreting the People’s Daily. If so, it will start appearing on banners across the country. Its omnipresence will not make it any easier to understand. ■For more expert analysis of the biggest stories in economics, finance and markets, sign up to Money Talks, our weekly subscriber-only newsletter. More

Citigroup warned investors late Wednesday that charges tied to the decline of the Argentine peso as well as the bank’s reorganization came in far higher than recently disclosed.
The bank said its fourth-quarter results, scheduled to be released Friday morning, were impacted by $880 million in currency conversion losses from the peso and $780 million in restructuring charges tied to CEO Jane Fraser’s corporate simplification project.
Those charges are significantly larger than the “couple hundred million dollars” apiece that CFO Mark Mason told investors to expect at a Dec. 6 conference hosted by Goldman Sachs.

Jane Fraser CEO, Citi, speaks at the 2023 Milken Institute Global Conference in Beverly Hills, California, May 1, 2023.
Mike Blake | Reuters

Citigroup warned investors late Wednesday that charges tied to the decline of the Argentine peso as well as the bank’s reorganization came in far higher than disclosed by the company’s CFO just weeks ago.
The bank said its fourth-quarter results, scheduled to be released Friday morning, were impacted by $880 million in currency conversion losses from the peso and $780 million in restructuring charges tied to CEO Jane Fraser’s corporate simplification project.

Those charges are significantly higher than the “couple hundred million dollars” apiece that CFO Mark Mason told investors to expect at a Dec. 6 conference hosted by Goldman Sachs.
“They gave guidance just a month ago, and now its several hundred million dollars higher for two categories,” veteran banking analyst Mike Mayo of Wells Fargo said in a phone interview. “If your problem is credibility with investors, then you shouldn’t be doing this type of thing.”
Fraser faces a key moment this week as Citigroup reports fourth-quarter and full-year 2023 earnings in the middle of restructuring efforts aimed at making the bank into a leaner, more profitable company. Throughout the past two decades, Citigroup has been dogged by high expenses and eroding credibility after Fraser’s predecessors underdelivered on targets. That’s left Citigroup the lowest-valued among the six biggest U.S. banks.
Beyond the two charges, Citigroup disclosed Wednesday that it needed to build reserves by $1.3 billion because of its exposure to Argentina and Russia, and that it would post a $1.7 billion expense for a special FDIC assessment tied to the 2023 regional bank failures.
All told, the charges are likely to result in a $1 per share fourth-quarter loss, according to Mayo. Despite his own skepticism that the bank can achieve its targets, Mayo recommends Citigroup stock, saying it is so beaten down that it can double within three years.

Shares of the bank dipped about 1% in after hours trading Wednesday.
A Citigroup spokeswoman declined to comment on the bank’s shifting guidance, instead pointing to remarks from Mason published late Wednesday.
“While these items are meaningful for our 2023 results, we remain on track to meet the 2023 expense guidance (excluding FDIC and divestitures) and all of our medium-term targets,” Mason said. “The items we disclosed today do not change our strategy.” More