Citigroup Inc. (NYSE:C) Downsizes Yet Again; 11,000 People to Lose JobsCEO Michael Corbat announced on Wednesday that the company is cutting 11,000 jobs, which constitute about 4% of the total workforce. The company is selling off consumer operations in
Romania, Turkey and Uruguay to concentrate on those
countries, which have the highest growth potential.
6,200 jobs are from Citi's consumer banking unit, which handles everyday functions like branches and checking accounts and 1,900 are from the institutional clients group, including the investment bank. The technology and operations will also have job cuts as Citi is shifting jobs to “lower-cost locations”. Investors have reacted favorably as the stock surged more than 6% in one day, which is a rise of $2.4 at $36.43 in midday trading.
Banks had made immense revenue by adopting methods such as trading for their own profit or marketing credit cards to college students. But all that is changing fast with new regulations being enforced, which is why they are searching for other ways to make some cash. Citi didn’t do too well and barely managed to stay afloat by taking taxpayer-funded bailout loans. It has been in recovery mode for long and is desperately searching for a sustainable business model that will put them back in business.
Glenn Schorr, an analyst for the financial services company Nomura stated that the cuts might be viewed as being too light by analysts and investors, but it is a step in the right direction for sure. According to Corbat, the idea behind the job cuts to let go off the areas where the bank is not making significant returns and instead consolidate their operations to focus on areas that guarantee revenue. The job cuts are expected to save $900 million in 2013 and more in the following years. But even so, their pre-tax charges will add up approximately to $1 billion in the fourth quarter.
However, shares of the firm soared 6.33% to $36.46.