Citigroup to cut 11,000 jobs
by Liz Hester
Wednesday’s big news, that Citigroup plans to cut 11,000 jobs or about 4 percent of its workforce, sent ripples through Wall Street and Main Street. The cuts will come from all parts of the business and across the globe.
Here are some of the details from the New York Times:
Under the reduction, 1,900 jobs will be eliminated in the institutional clients division. Another 6,200 positions will be removed from the bank’s consumer banking business, along with 2,600 jobs in the operations and technology group.
Since 2007, the bank has slashed its workforce by 33 percent, leaving it with about 250,000 employees today.
The reductions at Citigroup come after the bank’s powerful chairman, Michael E. O’Neill, engineered the ouster of its former chief executive, Vikram S. Pandit, and named a handpicked successor, Michael L. Corbat, according to several people close to the bank.
The move, announced Wednesday, is the latest illustration of the immense pressure on big banks to take action in response to stagnant revenue and weak stock prices. The decision also shows the company’s cost-cutting focus under Chairman Michael O’Neill, a banking veteran who took over for Richard Parsons in April and was known in his past jobs for recommending tough medicine.
More than half the cuts will take place in the company’s global consumer-banking unit, where Citigroup will close 84 branches around the world, including 44 in the U.S. Citi expects to sell or substantially scale back consumer lending in Pakistan, Paraguay, Romania, Turkey and Uruguay. The company will cut 6,200 jobs in that unit.
Chief Financial Officer John Gerspach, at a Goldman Sachs GS +0.47% financial-services conference, said the cuts are “a fairly comprehensive initial foray” and “part of a continuum” of business reviews and cost cuts by Mr. Corbat’s management team.
“What you can expect is a continuing examination of every one of our businesses,” Mr. Gerspach said. “We will constantly seek new areas to improve efficiency.”
The decision is the latest sign of banks slimming down amid soft economic growth, uneven markets and tough rules limiting bank profits. Citigroup shares have risen 35% this year but are down 26% since the end of 2010, amid a broad slowdown in markets businesses whose revival after the financial crisis helped bolster major bank stocks. Of the six giant U.S. banking companies, only Wells Fargo & Co. shares trade above the company’s reported book value, a measure of net worth.
Citigroup shares surged 7.1% in Wednesday afternoon trade to $36.71.
Here are the financials from the Bloomberg story:
The plan will save about $900 million in 2013, and projected annual savings will exceed $1.1 billion beginning in 2014, the company said. Annual revenue will drop about $300 million, according to the forecast. The $1 billion charge this quarter is before taxes. An additional $100 million of charges will come in the first half of next year, and Najarian said more cuts could follow.
And a little further down, this analysis of Citigroup’s recent investments in the business:
The bank had invested $3.9 billion last year in all of its businesses, including initiatives to meet regulatory requirements, modernize branches and boost spending on consumer marketing, Pandit said during a Jan. 17 conference call with analysts and investors.
“Vikram had invested heavily in the business back in 2010 and 2011 on the assumption of a stronger global economy,” Staite said. “That obviously hasn’t come through.”
Corbat’s plan calls for job cuts in the operations and technology group and global functions. Citi Holdings, the unit that contains about $171 billion of unwanted assets, will eliminate about 350 positions, the bank said. Most are related to branch closures in Greece and Spain, the bank said.
The job cuts at Citi Holdings don’t go far enough to fix the unit, according to Charles Peabody, an analyst in New York with Portales Partners LLC. Efforts to quicken its disposal of assets are hampered by a lack of funding for potential buyers, and aggressive sales efforts could produce losses beyond the bank’s current reserves, Peabody wrote in a Nov. 13 note.
But the real loss is for all the people who will be looking for another job, especially the bank tellers, loan officers and branch managers who likely haven’t earned (or saved) the bonuses that the investment bankers have.