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NEW YORK (Reuters) - Citigroup Inc. on Wednesday said it will eliminate 17,000 jobs, or 5 percent of its workforce, in a broad restructuring plan designed to cut costs and bolster its long underperforming stock price.
The reductions are designed to cut the New York-based bank's operating expenses, which soared 15 percent last year to $52 billion, while revenue rose just 7 percent. It constitutes the first companywide restructuring since Citicorp and Travelers Group merged in 1998 to form Citigroup.
Citigroup said about 9,500 jobs will move to lower-cost locations worldwide, with about two-thirds through attrition. Citigroup's largest unit, consumer banking, will face the biggest cuts.
The bank will take a $1.38 billion pre-tax charge, or $871 million after taxes, in the first quarter, and expects $200 million of additional pre-tax charges this year. It expects pre-tax savings of about $2.1 billion this year, $3.68 billion in 2008 and $4.58 billion in 2009.
"The 2009 number is obviously large, larger than I was expecting," said Joseph Dickerson, an analyst at Atlantic Equities in London. "The key question is, are these expense savings going to make Citi better at innovation, which is key for growth."
Shareholders have pressured Chief Executive Charles Prince to slash expenses even as the bank tries to boost revenue, especially outside the United States. The cuts follow a review begun in December by Chief Operating Officer Robert Druskin.
In an interview, Druskin said most of the job cuts will be made by year end. "We know where every head is coming from, we know where every dollar is coming from, and we're ready to move into implementation mode literally today," he said.
Druskin added that Citigroup loses about 20,000 employees a year through attrition.
CONSUMER BANKING HARDEST HIT
Cuts in consumer banking are expected to generate $650 million of savings in 2007 and $1.23 billion in each of 2008 and 2009.
Savings in corporate and investment banking are expected to total $400 million this year and $500 million in each of 2008 and 2009. Wealth management is expected to save $175 million this year and $150 million in both 2008 and 2009.
Expected savings also include $400 million this year, $1.1 billion in 2008 and $2 billion in 2009 from a previously announced plan to improve technology efficiency.
Citigroup plans to eliminate layers of management, often increasing the number of workers reporting to each manager. The bank also said it will simplify its technology platforms, and eliminate some corporate offices.
Citigroup shares closed Tuesday at $52.40 on the New York Stock Exchange. They have risen 15 percent since Prince became chief executive in October 2003, compared with a 29 percent gain in the 24-member Philadelphia KBW Bank Index.
(Additional reporting by Jeffrey Goldfarb in London and Dan Wilchins in New York)
The reductions are designed to cut the New York-based bank's operating expenses, which soared 15 percent last year to $52 billion, while revenue rose just 7 percent. It constitutes the first companywide restructuring since Citicorp and Travelers Group merged in 1998 to form Citigroup.
Citigroup said about 9,500 jobs will move to lower-cost locations worldwide, with about two-thirds through attrition. Citigroup's largest unit, consumer banking, will face the biggest cuts.
The bank will take a $1.38 billion pre-tax charge, or $871 million after taxes, in the first quarter, and expects $200 million of additional pre-tax charges this year. It expects pre-tax savings of about $2.1 billion this year, $3.68 billion in 2008 and $4.58 billion in 2009.
"The 2009 number is obviously large, larger than I was expecting," said Joseph Dickerson, an analyst at Atlantic Equities in London. "The key question is, are these expense savings going to make Citi better at innovation, which is key for growth."
Shareholders have pressured Chief Executive Charles Prince to slash expenses even as the bank tries to boost revenue, especially outside the United States. The cuts follow a review begun in December by Chief Operating Officer Robert Druskin.
In an interview, Druskin said most of the job cuts will be made by year end. "We know where every head is coming from, we know where every dollar is coming from, and we're ready to move into implementation mode literally today," he said.
Druskin added that Citigroup loses about 20,000 employees a year through attrition.
CONSUMER BANKING HARDEST HIT
Cuts in consumer banking are expected to generate $650 million of savings in 2007 and $1.23 billion in each of 2008 and 2009.
Savings in corporate and investment banking are expected to total $400 million this year and $500 million in each of 2008 and 2009. Wealth management is expected to save $175 million this year and $150 million in both 2008 and 2009.
Expected savings also include $400 million this year, $1.1 billion in 2008 and $2 billion in 2009 from a previously announced plan to improve technology efficiency.
Citigroup plans to eliminate layers of management, often increasing the number of workers reporting to each manager. The bank also said it will simplify its technology platforms, and eliminate some corporate offices.
Citigroup shares closed Tuesday at $52.40 on the New York Stock Exchange. They have risen 15 percent since Prince became chief executive in October 2003, compared with a 29 percent gain in the 24-member Philadelphia KBW Bank Index.
(Additional reporting by Jeffrey Goldfarb in London and Dan Wilchins in New York)