Citi: Corbat one-ups Pandit on 11,000 cuts
Citi's drive to slash costs highlights CEO Corbat's bid to assuage shareholder angst.
Michael Corbat, Citi’s new chief executive, has wasted no time in demonstrating how he plans to have a leaner Citi than his predecessor Vikram Pandit. On Wednesday he announced the cutting of more than 11,000 positions across the firm from its 260,000 headcount.
|Ex-CEO Pandit; Source: Reuters|
Some 70% of the cuts will be split between consumer banking and the institutional clients group. In consumer banking, branches are being cut in Brazil, Hungary, Hong Kong, Korea and the US. Franchises in the emerging markets of Pakistan, Paraguay, Romania, Turkey and Uruguay will be sold or scaled back.
The move to make cuts in such countries raises questions about the firm’s commitment to emerging markets, but Sinegal says it is more a reflection of the broader industry.
“In recent quarters, emerging markets have not been growing gangbusters,” he says. “Talent is still hard to come by and a lot of the banks have overspent in their race to be in emerging markets. Citi’s cuts seem more a reflection of those industry challenges than a statement on their strategy.”
In the institutional clients group, most of the cuts are taking place in the securities and banking business. The remaining cuts will be from corporate and Citi Holdings. Regionally, the cuts are split: North America: 4,600; EMEA: 3,800; Latin America: 2,100; and Asia 750.
The cuts are expected to cost the firm $1.1 billion. However, Citi says it expects the cuts will generate $900 million of expense savings benefiting 2013 results and that the annual expense savings will exceed $1.1 billion beginning in 2014.
“Citi has come a long way over the past several years,” says Corbat. “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 optimize the execution of our strategy to better serve our clients and deliver results for all of our stakeholders.”