NEW YORK: Citigroup Inc, which has lagged behind its peers in recovering from the financial crisis, said it is cutting 11,000 jobs worldwide, about 4 percent of its staff, to save as much as $1.1bn a year in expenses.
The move will initially result in pre-tax charges of $1bn against fourth-quarter earnings, the No. 3 US bank by assets said yesterday.
The cuts are Chief Executive Michael Corbat’s first major steps to reorganize the company since he took the reins in October after directors pushed out his predecessor, Vikram Pandit.
Investors welcomed the news. Citigroup shares were up 5.3 percent to $36.11 in morning trading on the New York Stock Exchange.
“We have identified areas and products where our scale does not provide for meaningful returns,” Corbat said in a statement issued by the company. “We will further increase our operating efficiency by reducing excess capacity and expenses.” The job cuts are part of a reorganisation that will reduce annual revenues by “less than $300m,” the bank said.
The bank has been in a long slog to recover from financial crisis losses, which prompted multiple government bailouts. While it has shed hundreds of billions of dollars of troubled assets, analysts have long been impatient with its failure to scale back costs enough to match reduced demand for its services.
Analysts have been expecting dramatic steps since Corbat was brought in as CEO by Citigroup Chairman Michael O’Neill. O’Neill is known in the banking industry for shrinking companies to eliminate businesses that are not earning satisfactory returns.
“Corbat has a limited window of opportunity here in which he can make his new CEO moves,” said Nancy Bush, a long-time bank analyst and a contributing editor at SNL Financial. Given the mandate he has to act, she said, “you might as well get the shocking numbers out first.”
Still, Bush expects Corbat will continue reorganising and cutting jobs for two years. “I look at this as the first cut,” she said. “Corbat will be forever digging and looking for places to cut, and inevitably personnel will be the biggest part of that.” The job cuts announcement came a few hours before Citigroup Chief Financial Officer John Gerspach was scheduled to speak at midday at a major conference of institutional investors in New York.
About 35 percent of the fourth-quarter restructuring charges will be taken in the global consumer banking unit, where 6,200 jobs will be cut, the bank said. About 40 percent of those layoffs will be in technology and operations support areas.
The bank expects to sell or scale back consumer operations in Pakistan, Paraguay, Romania and Uruguay. As it continues to focus on 150 high-growth markets, it plans to shed 84 branches in five countries, more than half of them in the United States.
After the restructuring, the bank will have 4,000 branches around the world. Reuters
