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The Citibank branch in New York . (Bloomberg) |
NEW YORK (AP) ― Citigroup said Wednesday that it will cut 11,000 jobs, a bold early move by new CEO Michael Corbat.
The cuts amount to about 4 percent of Citi’s workforce. The bulk of them, about 6,200 jobs, will come from Citi’s consumer banking unit, which handles everyday functions like branches and checking accounts.
Citi said that it will sell or scale back consumer operations in Pakistan, Paraguay, Romania, Turkey and Uruguay and focus on 150 cities around the world “that have the highest growth potential in consumer banking.”
The bank, the third-largest in the country by assets, did not say how many jobs it will cut in the United States.
About 1,900 job cuts will come from the institutional clients group, which includes the investment bank. The company will also cut jobs in technology and operations by using more automation and moving jobs to “lower-cost locations.”
Investors appeared to like the move. They sent Citi stock up $2.17, or 6.3 percent, to close at $36.46 Wednesday.
Job cuts are a familiar template in a banking industry still under the long shadow of the 2008 financial crisis.
Banks are searching for ways to make money as new regulations crimp some of their former revenue streams, like trading for their own profit or marketing credit cards to college students.
Customers are still nervous about borrowing money in an uncertain economy. And they are still filing lawsuits over industry practices like risky mortgage lending that helped cause the crisis.
Citi fared worse than others. It nearly collapsed, had to take two taxpayer-funded bailout loans, and became the poster child for banks that had grown too big and disorderly.
After a long stretch of empire-building, it has been shrinking for the past several years, shedding units and trying to find a business model that’s more streamlined and efficient.
Corbat became CEO in October after Vikram Pandit unexpectedly stepped down. Pandit had reportedly clashed with the board over the company’s strategy and its relationship with the government.
While the job cuts are among the first major moves by Corbat, they are in line with Pandit’s blueprint. Citi’s roster of 262,000 employees is down from 276,000 at this time in 2009.
Glenn Schorr, an analyst for the financial services company Nomura, said that the cuts announced Wednesday might be considered too light by analysts and investors. But he said they were “a step in the right direction” and noted “substantial” job and cost cuts the company has made over the past seven quarters.
Bank of America and Morgan Stanley have also shed jobs over that period.
In a statement Wednesday, Corbat said his bank remains committed to “our unparalleled global network and footprint.” However, he added: “We have identified areas and products where our scale does not provide for meaningful returns.”
He promised that the bank would continue to trim, whether in “technology, real estate or simplifying our operations.”
The paring hasn’t always gone as well as Citi has hoped. This fall, for example, when Citi negotiated the sale of its stake in the retail brokerage Morgan Stanley Smith Barney, it got far less than it wanted from the buyer, Morgan Stanley.
Corbat said Citi “has come a long way over the past several years.”
Citi said it expects the cuts to save $900 million next year, and more in the following years. They will be a drag, though, in the short term: Citi said it expects to record pre-tax charges of approximately $1 billion in the fourth quarter.
