By trimming 20,000 jobs, Citigroup aims to reduce its annual expenses to a range of $51 billion to $53 billion over the next several years.
Citigroup, one of the world’s largest financial institutions, has disclosed plans to eliminate around 20,000 jobs by the end of 2026, marking a pivotal moment in the bank’s most extensive restructuring effort in decades. This strategic move is expected to reduce Citi’s headcount by approximately 10%, with the total number of employees standing at 200,000 in December, excluding those associated with the Mexico business set to be spun off.
The cost-cutting initiative was unveiled alongside Citi’s announcement of a fourth-quarter loss. This restructuring effort is part of Chief Executive Jane Fraser’s mandate to simplify and streamline the banking giant, which was once the world’s largest financial services firm. Fraser assumed her role in 2021 with a mission to revamp the bank’s sprawling international operations and extensive array of financial products.
Citi’s approach, once celebrated as a unique and diversified franchise, has lost its lustre in comparison to its peers, prompting Fraser to embark on a multiyear plan aimed at focusing on strengths, removing layers of excess staff, and improving the bank’s overall direction. The market’s response to these transformative measures is eagerly anticipated, with Citi shares already rising by 1% on the announcement day.
Ken Usdin, a Jefferies analyst, acknowledged the ongoing transformation, stating, “Every bank is a function of what they’ve become over the past 30 to 40 years – it doesn’t change overnight. We’re at the halfway point. Let’s see what the market’s reaction is.”
Fraser’s strategy has involved shedding some of Citi’s international consumer-banking businesses and sharpening its focus on corporate clients both in the U.S. and abroad. The streamlining efforts gained momentum in September when Fraser announced a simplification of Citi’s organizational structure, leading to the elimination of management layers. Layoffs commenced in November, and with the recent announcement, it appears that Citi is on track to fulfill speculations that it would ultimately cut 10% of its workforce.
By trimming 20,000 jobs, Citi aims to reduce its annual expenses to a range of $51 billion to $53 billion over the next several years. This ambitious cost-cutting goal is a response to total costs reaching $56.4 billion in the previous year, accounting for several divestitures and a special fee imposed by the Federal Deposit Insurance Corp. after bank failures.
Reflecting on the restructuring initiatives, Fraser emphasized the commitment of herself and the management to transform the company for the long term. “It’s not lost on me that there have been many attempts in the past to change this firm,” she stated during a conference call with analysts.
In terms of financial performance, Citi reported a net loss of $1.8 billion, or $1.16 a share, in the fourth quarter, a significant contrast to the net income of $2.51 billion, or $1.16 a share, recorded in the same period a year earlier. The revenue for the quarter fell by 3% to $17.4 billion from $18 billion, with the recent devaluation of the Argentine peso accounting for a reduction of $880 million in the quarter’s revenue.
Despite the fourth-quarter loss, the underlying results for key business segments showed improvements. The service business, responsible for back-office functions, reported revenue of $4.5 billion, reflecting a 6% increase. However, total trading revenue fell by 19% to $3.4 billion, primarily due to a 25% decline in trading on bonds and other fixed-income securities, influenced by the Argentine devaluation and less-volatile markets. On a positive note, revenue from Citi’s stock-trading desks rose by 9%.
In the banking sector, which includes merger advice, stock-and-debt underwriting, and corporate loans, revenue experienced a substantial 22% increase to $949 million. Citi witnessed a surge in fees from fixed-income offerings and deals. The U.S. consumer banking arm also contributed to positive results, with revenue rising by 12% to $4.9 billion, driven by gains from both credit cards and branch banking.
Citi’s wealth management business reported revenue of $1.7 billion, down by 3% from the previous year. For the entire year, Citi reported a net income of $9.2 billion, or $4.04 a share, representing a 38% decrease from the $14.8 billion, or $7 a share, recorded in 2022. Bank executives conveyed their expectations for a 4% growth in revenue this year, anticipating rebounds in investment banking and wealth management businesses. The restructuring endeavours, coupled with a focus on core strengths, are pivotal in positioning Citigroup for sustained growth in a rapidly evolving financial landscape.