Citigroup To Cut 11,000 Jobs
Banks have been under increasing pressure to cut costs and eliminate redundancies. The cuts will eliminate about 4 percent of Citi's workforce.
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Now what used to be the biggest bank in the United States is getting smaller. Citigroup says it will cut 11,000 jobs in an effort to bring down costs and become more streamlined. The layoffs will cost the bank a billion dollars in severance packages and related expenses during its fourth quarter.
But as NPR's Ailsa Chang reports, Citi's taking the short-term hit in hopes of turning its financial health around.
AILSA CHANG, BYLINE: Not many people were all that surprised when Citigroup announced these drastic measures. It's a tough climate for banks. New rules are requiring them to build up more capital so they'll have more cushion in case there's another financial crisis. And really low interest rates mean you can't make a whole lot of cash lending money these days.
So Charles Calomiris of Columbia Business School says the writing was on the wall.
CHARLES CALOMIRIS: If you were a banker right now, faced with continuing lack of profitability and very low stock prices and huge regulatory uncertainties, what would you do? I can tell you what I would do. I would be trying to get lean and mean.
CHANG: Lean and mean. It's a directive Citi's new CEO Michael Corbat is adopting with a vengeance.
Calomiris says Citigroup especially needs that right now, because the bank's financial woes are in a class of their own.
CALOMIRIS: It's something that's happening across the financial services industry, but it's not surprising that Citibank would be the most prominent recent example. Recall that Citibank was the bank that failed, so to speak, its stress test recently.
CHANG: What Calomiris is referring to is an evaluation federal regulators do annually to assess the health of banks. They figure out if each institution has enough cash on hand to handle all kinds of hypotheticals, like what happens if the stock market tanks, if unemployment soars, or if there's an oil price shock?
Fifteen out of 19 big banks passed this year, but Citi got lousy marks. And that's one reason its directors sent their previous CEO, Vikram Pandit, packing this fall.
Nancy Bush of SNL Financial says the board wanted someone who would cut costs even more than Pandit did - someone like Michael Corbat - someone with an attitude more in line with Citi's chairman Michael O'Neill.
NANCY BUSH: I think that Corbat and O'Neill, as traditional bankers, as hard-nosed bankers, are going to be much more in tune to making these kinds of moves than, obviously, Pandit and O'Neill were.
CHANG: Citigroup says the layoffs will end up saving the bank $900 million starting next year, and then a billion more dollars every year after that.
Ailsa Chang, NPR News, New York. Transcript provided by NPR, Copyright NPR.