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February 11, 2005
NEW YORK - Citigroup Inc. on Friday said it is cutting jobs in its corporate and investment bank to save money, and a person familiar with the decision said more than 1,000 positions may be lost.
The cuts will affect about 2 percent to 3 percent of the unit's 48,000 employees worldwide, and are expected at all levels of the unit, the person said. New York-based Citigroup is the world's largest financial services company.
Chief Executive Charles Prince is trying to cut expenses and exit businesses not focused on consumer or corporate banking, after a year when costs rose by one-third. He is moving away from predecessor and mentor Sanford "Sandy" Weill's vision of creating a one-stop financial supermarket.
"Prince and the board are focused on making money and having the most profitable business, not necessarily the most complete," said Michael Holland, the founder of Holland & Co. in New York. "Anything that makes sense, including terminations, are probably all on the table."
Citigroup spokeswoman Christina Pretto said "we are making limited staff reductions, consistent with two fundamental objectives: keeping expenses low while continuing to invest in areas where we see growth opportunities." She declined to say how many jobs are being cut.
Last week, Deutsche Bank AG said it will also cut some investment banking jobs. In contrast, Bank of America Corp., which is spending $675 million to expand its smaller investment bank, is adding jobs.
The Citigroup cuts come amid a separate announcement on Friday that the bank is streamlining its capital markets funding business, which helps fund day-to-day operations and business growth, and simplifying its legal structure.
"Citigroup is trying to figure out where to generate efficiencies to improve profit, which is what we as shareholders expect," said Jim Lyon, who helps invest more than $450 million at Oakwood Capital Management in Los Angeles.
Citigroup shares on Friday rose 42 cents to $49.40 on the New York Stock Exchange. They have risen 9 percent since Prince became chief executive in Oct. 2003, lagging the 16 percent increase in the Philadelphia KBW Bank Index.
SOARING COSTS
Citigroup's investment bank has been the world's biggest underwriter of stocks and bonds for five straight years, according to Thomson Financial. It is also one of the world's biggest advisers on mergers.
Yet while profit has risen, expenses have spiraled higher, though Prince shares Weill's commitment to keeping costs down.
The unit reported a fourth-quarter profit of $1.69 billion, up 32 percent from a year earlier, as revenue rose 15 percent to $5.46 billion.
Noninterest expenses, however, rose 25 percent to $3.3 billion, including a 48 percent jump in employee compensation and benefits to $2.14 billion.
Such rivals as J.P. Morgan Chase & Co. and Merrill Lynch & Co. have also reported big payroll increases amid growing competition for Wall Street investment bankers.
Citigroup operating expenses swelled 33 percent last year to $52 billion, while revenue rose just 11 percent to $86.2 billion. Profit fell 5 percent to $17 billion, largely because of costs for WorldCom Inc., Enron Corp. and other litigation.
Citigroup employs roughly 275,000 people in more than 100 countries.
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