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Citigroup is going to cut 11,000 jobs, the bank said in a release.As a result of the job cuts, the bank expects to take a fourth-quarter pre-tax charge of $1 billion and $100 million in related charges in the first half of 2013.
Glancing over the release, it looks like most of these cuts will hit the bank’s foreign operations, especially the operations and technology departments.
The bank identified these as areas that do not provide “for meaningful returns,” the CEO said in a statement.
Citigroup has a new CEO, Michael Corbat, who took over the helm back in October after Virkam Pandit resigned suddenly. This is his first real big move as CEO.
Shares of Citi were last trading up more than 3% in the pre-market.
Here’s the release:
Citigroup today announced a series of repositioning actions that will further reduce expenses and improve efficiency across the company while maintaining Citi’s unique capabilities to serve clients, especially in the emerging markets. These actions will result in increased business efficiency, streamlined operations and an optimised consumer footprint across geographies.
Michael Corbat, Citi’s Chief Executive Officer, said, “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. And we will further increase our operating efficiency by reducing excess capacity and expenses, whether they centre on technology, real estate or simplifying our operations.”
Due to this repositioning, Citi expects to record pre-tax charges of approximately $1 billion in the fourth quarter of 2012 and approximately $100 million of related charges in the first half of 2013. Citi currently expects that the repositioning will generate $900 million of expense savings benefitting 2013 results and that the annual expense savings will exceed $1.1 billion annually beginning in 2014. Citi also expects the repositioning actions to have a negative impact on annual revenues of less than $300 million. These actions will result in a reduction of more than 11,000 positions.
Citi expects the repositioning activity to affect the following businesses and functions:
Institutional Clients Group (ICG): Approximately 25% of the announced fourth quarter repositioning charges are expected in Securities & Banking with another 10% in Transaction Services. The repositioning actions are expected to result in a reduction of approximately 1,900 positions, of which more than half are in the Operations & Technology functions that support the business. The actions are designed to streamline our client coverage model in Banking and improve overall productivity in our Markets business, especially in areas experiencing continued low profitability such as cash equities.
Global Consumer Banking (GCB): Approximately 35% of the fourth quarter repositioning charges are expected to be incurred in Global Consumer Banking, resulting in a reduction of approximately 6,200 positions, of which approximately 40% are in the Operations & Technology functions that support the business. As a result of the repositioning actions, Citi expects to either sell or significantly scale back consumer operations in Pakistan, Paraguay, Romania, Turkey and Uruguay.
Consistent with Citi’s strategy of focusing on the 150 cities that have the highest growth potential in consumer banking, Citi will optimise its branch footprint and further concentrate its presence in major metropolitan areas. The markets affected by the reductions include Brazil (14 branches), Hong Kong (7), Hungary (4), Korea (15), and the United States (44).
Citi will continue to invest in its franchises in these countries to serve its targeted consumer segments. After this repositioning, Citi will have more than 4,000 retail branches around the world and all of the aforementioned countries will continue to be served by our institutional businesses.
Citi Holdings: Citi Holdings is expected to eliminate approximately 350 positions and incur approximately 5% of the repositioning charges. Most of the repositioning charges are related to branch rationalization in Greece and Spain.
Corporate/Other: About 25% of the announced repositioning charges are expected to be incurred in Corporate/Other.
- Operations & Technology: Citi’s Operations & Technology function is expected to achieve greater efficiency through increasing standardization and the use of automated processes; streamlining the organizational structure; and consolidating functions and moving certain positions to lower-cost locations. In addition, there will be a consolidation of certain locations in Citi’s real estate portfolio. In addition to the reductions in Operations & Technology positions that support the ICG and GCB businesses, these actions will result in the reduction of approximately 2,300 positions that support corporate services, real estate, and Citi Holdings.
- Global Functions: Roughly 300 Global Functions positions will be eliminated as a result of efficiency savings.
“Citi has come a long way over the past several years. We have been consistently profitable; our capital strength is among the highest in the industry; and we have shed hundreds of billions in assets and businesses that are not core to our strategy. We will continue to seek ways to optimise the execution of our strategy to better serve our clients and deliver results for all of our stakeholders,” concluded Mr. Corbat.