Citigroup Eliminates 11,000 Job Positions

on Dec 6, 2012
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On Wednesday 5 November Citigroup (NYSE:C) announced it is cutting 11,000 jobs worldwide in an attempt to reduce costs and shrink the bank’s staffing levels to a more manageable size.

The move is a complete shift in tactics for the bank’s board of directors – the previous CEO Vikram Pandit, who was ousted two months ago, hired thousands of workers and invested billions of dollars to expand revenue and help the bank survive the financial crisis. His successor Michael Corbat and Chairman Michael O’Neill are on the opposite spectrum – they believe in slashing costs as much as possible, including shutting down branches and completely pulling out of some emerging markets.

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“It is a shift in priorities and a shift in magnitude,” said Marty Mosby, analyst at Guggenheim Securities, as quoted by Bloomberg. “The board was more comfortable in maximizing profitability through efficiency initiatives in lieu of trying to aggressively seek incremental growth opportunities.”
According to Reuters, the announced job cuts, which account for 4 percent of Citi’s workforce, are expected to bring at least $1.1 billion (£684 million) in annual savings starting 2014. However the repositioning by the bank will also result in revenue dropping by $300 million (£186 million) and burden Citi with about $1 billion (£621 million) in charges. Almost 35 percent of the bank’s fourth-quarter costs will be tied to the job reductions.

!m[The American Bank Intends to Dump All the Restructuring Costs in the Fourth Quarter of This Year](/uploads/story/975/thumbs/pic1_inline.png)The changes will affect almost every division of the company from securities trading to investment banking and corporate overhead. Operations in Turkey, Romania, Paraguay, Pakistan and Uruguay will be significantly scaled back or entirely sold out. “These actions are logical next steps in Citi’s transformation. While we are committed to – and our strategy continues to leverage – our unparalleled global network and footprint, we have identified areas and products where our scale does not provide for meaningful returns” said Mr Corbat in the press release.

Investors welcomed the news of the job cuts – Citi’s share price rose by 6.33 percent to $36.46. The bank has seen its market valuation rise by 38.58 percent or $10.15 since the beginning of the year.
**Sectorwide Workforce Reductions**
Reuters reported that since early 2011 major banks have announced more than 160,000 job cuts across all divisions. Only two months ago UBS said it would dismiss 10,000 employees from its fixed-income trading unit – an area in investment banking most affected by the Basel III regulations.

Bank of America, the second-largest bank by assets in the US, is still carrying out the announced in September 2011 30,000 layoffs, part of a plan to reduce annual expenses by $8 billion (£4.97 billion). The bank also said it is closing or selling 750 branches.
Other global financial institutions in the middle of cutting staff and costs include Morgan Stanley, Deutsche Bank and HSBC. Analysts from Sanford C. Bernstein told news agency Bloomberg last month that investment banks are pushed into cutting deeper due to the new capital rules meant to forestall another credit crisis such as the one from 2008. In order to reach at least half the returns they once made, companies have to slash payments to personnel and substitute some of its traders with computers. According to people with direct knowledge of Citi’s restructuring strategy, the bank intends to shrink division’s bonuses by as much as 10 percent. Most of the time however Wall Street companies are more inclined to shed workers instead of decreasing pays for their current staff.

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