Citigroup has announced it's eliminating 11,000 jobs — about four percent of its work force. It's the first major step of new CEO Michael Corbat, who's under pressure to trim fat from the unwieldy bank.
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One of the nation's largest banks, Citigroup, is announcing thousands of layoffs. It's cutting 11,000 jobs, about 4 percent of its workforce. NPR's Ailsa Chang reports the cost-cutting strategy was expected from Citigroup's new CEO who's facing a lot of pressure to show results quickly.
AILSA CHANG, BYLINE: When Michael Corbat first stepped in as Citigroup's new CEO in mid-October, he faced some high expectations. Vikram Pandit, his predecessor, had just resigned after directors told him it was time to take a hike. The ouster surprised much of Wall Street, and since then, Corbat has said one of his main goals is to trim the fat from Citigroup's unwieldy structure, save the bank some money. Nancy Bush says Citi's directors had faith a traditional banker like Corbat could get the job done. She's a banking analyst and contributing editor to SNL Financial.
NANCY BUSH: Don't forget, Vikram Pandit was not a banker. He was an investment management guy. He was sort of an accidental CEO with Citigroup. And, you know, obviously, investors had been clamoring to see expense cuts and better earnings and, you know, Mr. Corbat has just shown that he's going to deliver.
CHANG: This cost-cutting announcement is Corbat's first big move as CEO. And if you're going to slice away excess, job cuts are the fastest way to do it. The majority of Citi's job-shedding will be in branch banking and consumer lending. The bank's also rolling back operations around the world: Pakistan, Paraguay, Uruguay, Turkey and Romania. Citi will take a short-term financial hit for this downsizing. They have to first pay out $1 billion in severance packages and other costs. But Bush says the bank is hardly in a unique position.
BUSH: This is happening not just across several banks but across all banks.
CHANG: Bank of America also had mass layoffs. And this is just the beginning, Bush says. Banks will be announcing more bloodletting and expense cutting for the next few years under a changing regulatory environment. New rules are requiring banks to hold more capital so they'll have a better buffer against the next financial disaster. That means profits are going to suffer a blow, especially since lending money isn't too hot of a business these days. Gary Townsend runs a hedge fund that focuses on banks.
GARY TOWNSEND: Because interest rates are so low, it's very difficult to get any return on investments. There's not a great deal of lending to do either in a slower economic environment where cash is replete around the world.
CHANG: So banks right now are really focused on the cost side. Before Corbat became CEO, he already earned his stripes as a cost-cutter when he helped slim down Citi's consumer lending business. Analysts say that puts him in lockstep with the bank's powerful chairman, Michael O'Neill. O'Neill is known not to be shy about doing some fast, decisive slashing to save some cash. Ailsa Chang, NPR News, New York. Transcript provided by NPR, Copyright NPR.