Under pressure from investors to contain burgeoning costs, Citigroup Inc., the nation’s largest financial institution, announced that it will eliminate about 17,000 jobs, shift 9,500 positions to “lower cost locations” and consolidate some corporate operations.
The steps — which are expected to shave more than $2 billion from the bank’s operating costs this year alone — also should result in faster service for consumers and businesses, Citi’s chief operating officer, Robert Druskin, said Wednesday.
“A lot of the initiatives undertaken in the name of expense reduction also are designed to unclog our corporate system,” he told The Associated Press. “We want to make Citigroup a more nimble, entrepreneurial place. We want decision-making to be quicker. We want things to move through the pipelines faster.”
The 17,000 job cuts amount to about 5 percent of the bank’s 327,000-strong work force.
Druskin led the structural expense review, which was aimed at reducing costs at the New York-headquartered bank and improving profit.
Citigroup executives have been under pressure from analysts and a number of investors, including Saudi Arabian Prince Alwaleed bin Talal, Citigroup’s biggest individual shareholder, to improve performance. The bank’s stock has not done as well as its peers, including Bank of America and JPMorgan Chase & Co., which have been more profitable.
The elimination of the jobs won’t reduce the bank’s work force, but merely slow its growth, Citi executives said.
Druskin told a conference call with Wall Street analysts they should expect Citi’s headcount to grow this year because of acquisitions and plans to open new branches, especially overseas.
“But that rate of growth will be at a significantly diminished rate,” Druskin said.
Goldman Sachs analysts William F. Tanona and Daniel Harris predicted “a tepid reaction” by investors they said had expected deeper cuts.
In afternoon trading, the bank’s shares dropped 89 cents, or 1.7 percent, to $51.51 on the New York Stock Exchange.
Carter Burgess, managing director of the Directorship Search Group, a recruiting firm based in Greenwich, Conn., said that “the question is, if all these areas for cutting expenses exist, why wasn’t it done sooner?”
He noted that Citigroup, like many of the giant money center banks, was built through a series of mergers and acquisitions and that “it’s not totally clear you can make all of this work efficiently together.”
Charles Prince, the bank’s chairman and chief executive officer, said that implementation of Druskin’s recommendations “will improve business integration as well as our ability to move quickly and seize new growth opportunities.”
Prince also emphasized that more expense cutbacks were possible, saying that Citi was adopting “a continuous approach to improving our efficiency — this is not a one-time effort.”
The changes announced Wednesday include eliminating unnecessary layers of management, reducing staff at corporate headquarters and other locations, expanding centralized procurement and consolidating some back-office and middle-office functions to eliminate duplication.
The bank said that including previously announced information technology savings, the overhaul will save the New York-based bank about $2.1 billion in 2007, $3.7 billion in 2008 and $4.6 billion in 2009.
Citigroup said it will record a pretax charge of $1.38 billion in the first quarter of 2007, and additional charges totaling approximately $200 million pretax over the subsequent quarters of 2007. The bank reports its first-quarter earnings next week.
“More than 9,500 jobs will be moved to lower-cost locations, both domestically and internationally, with about two-thirds through attrition,” the announcement said.
Druskin noted that Citigroup operates in more than 100 countries and that the majority of its workers already are overseas. But he emphasized that the move to reduce costs won’t mean wholesale transfers abroad.
“We already have lots of jobs in India — but also in Shanghai, Manila and Buffalo, N.Y.,” he said. “We’re looking for the right location.”
Druskin also confirmed that more than 40 Smith Barney units will be consolidated or closed. Smith Barney is the bank’s brokerage arm.
The 2007 cost savings were broken down as $650 million in the global consumer division, $400 million in markets and banking, $175 million in wealth management, $375 million in corporate operations and technology and $100 million in “other.” That’s in addition to $400 million previously announced information technology savings, Citigroup said.
Citigroup, one of the world’ largest financial institutions, had assets of more than $1.8 trillion at year’s end.