Citigroup Inc. (NYSE: C) may be announcing a restructuring effort today, but the move may not seem too extreme compared to past restructurings. What feels different here is that the bank is pointing where the cuts will be and quantifying those cuts up front. The aim is to reduce expenses and improve efficiency while maintaining services.
Michael Corbat, Citi’s new chief executive officer, is making his first mark on chopping away at Citi’s expense structure. These actions will result in a reduction of more than 11,000 positions.
Citi expects a pretax charge of about $1 billion in the fourth quarter of 2012 and approximately $100 million of related charges in the first half of 2013. The company projects $900 million of expense savings for 2013 results as a result, and longer term it expects savings of more than $1.1 billion annually after 2013. As far as what this will do to sales, Citi envisions a negative impact on annual revenues of less than $300 million.
Citi expects the repositioning activity to affect the following businesses and functions:
- Institutional Clients Group: 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 (more than half are in the Operations & Technology functions).
- Global Consumer Banking: Approximately 35% of the fourth-quarter repositioning charges are expected to be incurred, resulting in a reduction of approximately 6,200 positions (about 40% are in the Operations & Technology functions that support the business). As a result, Citi expects to either sell or significantly scale back consumer operations in Pakistan, Paraguay, Romania, Turkey and Uruguay.
Citi will maintain its focus on the 150 cities that have the highest growth potential in consumer banking. It will be trimming branch counts as follows: 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 the aforementioned countries will continue to be served by our institutional businesses.
Citi Holdings is expected to eliminate approximately 350 positions and incur approximately 5% of the repositioning charges, mostly related to branch rationalization in Greece and Spain.
In Corporate (and Other), the cuts will be as follows: Operations & Technology reduction of approximately 2,300 positions that support corporate services, real estate, and Citi Holdings. Roughly 300 Global Functions positions will be eliminated as a result of efficiency savings.
Wall St. apparently likes the news. Citigroup shares are up almost 3% at $35.25 against a 52-week range of $24.40 to $38.72.
JON C. OGG