[h=3]By MATTHIAS RIEKER[/h]Citigroup Inc. said Wednesday that it will eliminate 11,000 jobs, or about 4% of its workforce, and take a related $1 billion fourth-quarter charge.
The bank has been under increasing pressure to cut costs to lift returns, and Citigroup's new chief executive, Michael Corbat, has said his priority is to make Citi a leaner and more efficient bank.
The moves are expected to save $900 million next year and $1.1 billion annually beginning in 2014. It will slice less than $300 million off revenue, Citi said.
The sweeping cuts are Mr. Corbat's first stamp on the bank since taking over the CEO post from Vikram Pandit. On the day of his appointment in mid-October, Mr. Corbat wrote in a memorandum to Citi employees that he would make changes after taking time to review the company and its structures.
"These actions are logical next steps in Citi's transformation," Mr. Corbat said in a press release. "We have identified areas and products where our scale does not provide for meaningful returns. And we will further increase our operating efficiency by reducing excess capacity and expenses, whether they center on technology, real estate or simplifying our operations."
Citi shares jumped 4.5% to $35.83 in morning trading, their biggest increase since Oct. 15, when Citi announced third-quarter results.
Wells Fargo Securities analyst Matthew Burnell said he was pleased with the cuts—and surprised by the magnitude of the action.
RBC Capital Markets analyst Gerard Cassidy said he believes the cuts are "just the beginning." Mr. Cassidy sees Chairman Michael O'Neill's handwriting in Wednesday's action. Mr. O'Neill became Chairman of Citi earlier this year, and reportedly had been a driving force behind Mr. Pandit's resignation.
"We believe O'Neill is a serious cost-cutter with a relentless focus on reaching above average returns for shareholders," Mr. Cassidy wrote in a research report. "Today's announcement shows that there's a new sheriff in town and nothing is sacred."
While Citi has come a long way since its near collapse in late 2008, when it was forced to take a $45 billion federal bailout, the bank's cost of doing business had repeatedly disappointed analysts. Despite the cuts, Mr. Corbat was quick to reiterate that Citi's overall strategy to focus on consumer and capital-markets banking around the world wouldn't change.
Citi reported a $6.3 billion profit for the first three quarters this year, down 37% from the same period a year earlier. Expenses totaled $36.7 billion, down 3%.
Before Citi announced its expense cuts, analysts had expected the bank to report earnings of $1.04 per share in the fourth quarter, compared to $1.23 a year earlier, according to Thomson Reuters. Analysts expected Citi to report earnings of $4.19 this year, and $4.64 in 2013.
Citigroup finance chief John Gerspach is scheduled to present later Wednesday at the Goldman Sachs financial-services investor conference.
Consumer banking, which has been the bright spot of Citi's revenue growth of late, will be hit hardest by the cuts, with about 35% of the charges and the majority of layoffs in branch banking and consumer lending. The bank will scale back or exit from consumer banking in Pakistan, Paraguay, Romania, Turkey and Uruguay.
Even Citi's top markets aren't spared. The bank will cut its number of branches in Brazil and Hong Kong. Citi will also close branches in Hungary, South Korea and the U.S.
In the capital-markets and transaction-processing units, a combined 1,900 jobs will be cut. Citi said 35% of the $1 billion charge is related to those two businesses.
Citi said the measures are being taken to improve productivity, particularly in its cash equities business. That business has been hit hard by slower trading volumes over the last two years, and Citi has, at times, been struggling more than its competitors to reshape those operations profitably.
Citi said it would cut an additional 2,600 staffers in back-office operations such as technology.
Mr. Corbat had spent a significant part of his recent career at Citi shrinking the bank, particularly its consumer lending businesses, and dumping derivatives tied to mortgages.
Prior to the promotion, Mr. Corbat ran Citi Holdings, an operating unit the bank formed to house businesses slated for disposal.
—Brett Philbin contributed to this article.Write to Matthias Rieker at [email protected]
The bank has been under increasing pressure to cut costs to lift returns, and Citigroup's new chief executive, Michael Corbat, has said his priority is to make Citi a leaner and more efficient bank.
The moves are expected to save $900 million next year and $1.1 billion annually beginning in 2014. It will slice less than $300 million off revenue, Citi said.
The sweeping cuts are Mr. Corbat's first stamp on the bank since taking over the CEO post from Vikram Pandit. On the day of his appointment in mid-October, Mr. Corbat wrote in a memorandum to Citi employees that he would make changes after taking time to review the company and its structures.
"These actions are logical next steps in Citi's transformation," Mr. Corbat said in a press release. "We have identified areas and products where our scale does not provide for meaningful returns. And we will further increase our operating efficiency by reducing excess capacity and expenses, whether they center on technology, real estate or simplifying our operations."
Citi shares jumped 4.5% to $35.83 in morning trading, their biggest increase since Oct. 15, when Citi announced third-quarter results.
Wells Fargo Securities analyst Matthew Burnell said he was pleased with the cuts—and surprised by the magnitude of the action.
RBC Capital Markets analyst Gerard Cassidy said he believes the cuts are "just the beginning." Mr. Cassidy sees Chairman Michael O'Neill's handwriting in Wednesday's action. Mr. O'Neill became Chairman of Citi earlier this year, and reportedly had been a driving force behind Mr. Pandit's resignation.
"We believe O'Neill is a serious cost-cutter with a relentless focus on reaching above average returns for shareholders," Mr. Cassidy wrote in a research report. "Today's announcement shows that there's a new sheriff in town and nothing is sacred."
While Citi has come a long way since its near collapse in late 2008, when it was forced to take a $45 billion federal bailout, the bank's cost of doing business had repeatedly disappointed analysts. Despite the cuts, Mr. Corbat was quick to reiterate that Citi's overall strategy to focus on consumer and capital-markets banking around the world wouldn't change.
Citi reported a $6.3 billion profit for the first three quarters this year, down 37% from the same period a year earlier. Expenses totaled $36.7 billion, down 3%.
Before Citi announced its expense cuts, analysts had expected the bank to report earnings of $1.04 per share in the fourth quarter, compared to $1.23 a year earlier, according to Thomson Reuters. Analysts expected Citi to report earnings of $4.19 this year, and $4.64 in 2013.
Citigroup finance chief John Gerspach is scheduled to present later Wednesday at the Goldman Sachs financial-services investor conference.
Consumer banking, which has been the bright spot of Citi's revenue growth of late, will be hit hardest by the cuts, with about 35% of the charges and the majority of layoffs in branch banking and consumer lending. The bank will scale back or exit from consumer banking in Pakistan, Paraguay, Romania, Turkey and Uruguay.
Even Citi's top markets aren't spared. The bank will cut its number of branches in Brazil and Hong Kong. Citi will also close branches in Hungary, South Korea and the U.S.
In the capital-markets and transaction-processing units, a combined 1,900 jobs will be cut. Citi said 35% of the $1 billion charge is related to those two businesses.
Citi said the measures are being taken to improve productivity, particularly in its cash equities business. That business has been hit hard by slower trading volumes over the last two years, and Citi has, at times, been struggling more than its competitors to reshape those operations profitably.
Citi said it would cut an additional 2,600 staffers in back-office operations such as technology.
Mr. Corbat had spent a significant part of his recent career at Citi shrinking the bank, particularly its consumer lending businesses, and dumping derivatives tied to mortgages.
Prior to the promotion, Mr. Corbat ran Citi Holdings, an operating unit the bank formed to house businesses slated for disposal.
—Brett Philbin contributed to this article.Write to Matthias Rieker at [email protected]