Citigroup Inc. C will be axing around 2,000 jobs next month, mainly middle or back-office positions globally, per a Bloomberg report. Notably, the recent layoffs are part of Chief Executive Officer Michael Corbat’s restructuring activities.
This move follows the bank’s strategy of reducing costs, amid decreasing business transactions, stricter regulations and high litigation costs. Since the 2008 financial crisis, banks have been reducing jobs to trim costs.
As per the source, staff at institutional business, which includes trading and investment-banking operations will form a major part of the layoffs. Notably, employees working with annual performance-based criteria in this unit will be under the purview of dismissal.
At the Goldman Sachs US Financial Services Conference in New York in December, Citigroup’s Chief Financial Officer – John Gerspach said "From an expense point of view, we will be taking a repositioning charge of say about $300 million in Citicorp in the fourth quarter,". "That is as we continue to resize our infrastructure and our capacity to deal with a continuing low-revenue environment."
Alongside, Morgan Stanley MS plans to cut around 1,200 jobs, including 470 traders and salespeople in its fixed-income, currencies and commodities (FICC) unit and the remaining reductions in infrastructure and support staff for the unit from offices all over the world. The move comes on the heels of stringent capital regulations, lower client activity and a shift toward electronic trading, which led to the underperformance of the FICC business, compelling the bank to cut back jobs.
The job cuts are expected to result in a severance charge of about $150 million in the fourth quarter. However, cost savings to be achieved by this move were not revealed with more details expected to come forward in the bank’s January update.
We believe Citigroup is well positioned to resolve its internal inefficiencies and setbacks. Further, we believe these streamlining initiatives will bolster the company’s capital position, reduce expenses and drive operational efficiencies.
Citigroup currently carries a Zacks Rank #3 (Hold). A couple of better-ranked banks include The PNC Financial Services Group, Inc. PNC and Old Second Bancorp Inc. OSBC, both with a Zacks Rank #2 (Buy).
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