Citigroup to Cut 11,000 Jobs
and Take $1 Billion Charge
Current Event
Issue:
Citigroup announced on Wednesday
that it would cut 11,000 jobs, reducing its work force by roughly 4 percent in
an effort to cut costs and increase operating efficiency.
Overview:
Citigroup announced on Wednesday
that it would cut 11,000 jobs, a move that will save the company more than $1
billion annually. It will reduce their work force in worldwide by roughly 4
percent in an effort to cut costs and increase operating efficiency.
Under the reduction, 1,900 jobs
will be eliminated in the institutional clients division. Another 6,200
positions will be removed from the bank’s consumer banking business, along with
2,600 jobs in the operations and technology group.
Most of the layoffs will be
operations and technology support staffers.
Its repositioning plans will
increase efficiency, streamline operations and optimize the company’s consumer
footprint. Citigroup expects to record charges of $1 billion in the fourth
quarter of this year and $100 million in the first quarter of 2013 in
connection with the plans. It expects the repositioning to create $900 million
in expense savings next year, and that annual expense savings will exceed $1.1
billion annually starting in 2014.
The overhaul is the first big move
by new CEO Michael Corbat. Corbat took the role in October from the former CEO
Vikram Pandit, who quit abruptly amid reported tensions with the company’s
board. Citigroup say that these actions are logical steps in Citigroup’s transformation,
which is to increase its operating efficiency by cutting branches and products
where the scale does not provide for meaningful returns. Citigroup intend to
continue a strategy of focusing on the bank’s core business.
Managerial
implications:
The reduction can save Citigroup
lots of cost in future. Citigroup is looking to drive profitability higher for
its shareholders and doing it through cost savings and improved efficiencies. However,
most of the layoffs will be operations and technology support staffers, often
resulting in bank branches being closed. As more and more branches closed, many
consumers will leave Citigroup.
Reference:
1. “Citigroup to Cut 11,000 Jobs and Take $1 Billion Charge”
2. “Citigroup
new CEO Michael Corbat to slash 11,000 jobs worldwide, 1,700 in New York City”
3. “The Citigroup Bloodbath: New
CEO Cuts 11,000 Jobs”
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