February 11, 2005
Bloomberg
Citigroup Inc., the world's biggest bank, is eliminating about 1,000 jobs, mostly in its corporate and investment banking unit, to accelerate profit growth, two people familiar with the plans said.
The cuts, which affect less than 3 percent of the unit's workforce of 48,000, include employees at all levels within the company, one of the people said. Both of the people spoke on condition of anonymity.
"We are making limited staff reductions,'' said Christina Pretto, a Citigroup spokeswoman. She declined to say how many jobs are being cut. The bank is "keeping expenses low while continuing to invest in areas where we see growth opportunities,'' she said.
Citigroup Chief Executive Charles Prince, 55, is trimming costs and exiting some businesses to reach his annual profit growth target of at least 10 percent. Last month, the lender agreed to sell Travelers Life & Annuity and most of its life insurance divisions to MetLife Inc. Analysts polled by Thomson Financial expect Prince will fall short of his profit goal this year, boosting earnings by 4 percent.
"Chuck Prince has set the tone to make the company more focused,'' said Stephen Berman, who helps manage about $7 billion, including Citigroup shares, at Stein Roe Investment Counsel in New York. "When you look at the fourth quarter, the corporate and investment bank's expenses rose at a faster rate than revenue.''
EUROPEAN BONDS
Prince's shift in strategy comes as the bank grapples with regulatory and legal setbacks on three continents. Chief Financial Officer Sallie Krawcheck said today that it's ``difficult for us to quantify'' how much earnings may have been hampered from allegations that Citigroup bond traders manipulated the European bond market.
``There's no doubt that if you look at the numbers for the fourth quarter that our results in the corporate business in EMEA were not as strong as we would have hoped,'' Krawcheck, 40, said on a conference call with investors. ``Some part of it may have been from folks not doing as much business with us.''
Citigroup shares peaked at $52.29 on April 1 and slipped 0.7 percent in 2004, trailing JPMorgan Chase & Co.'s 6.2 percent advance, as Prince struggled to persuade investors the bank wouldn't be faced with more scandals. Shares of Citigroup rose $1 to $49.47 as of 12:26 p.m. today in New York Stock Exchange composite trading.
EXPENSES
The bank's corporate and investment bank earned $1.7 billion in the last three months of 2004, an increase of 32 percent from the same period a year earlier. Revenue rose 15 percent to $5.5 billion while non-interest expenses climbed 25 percent to $3.3 billion.
Citigroup's total operating expenses swelled 33 percent last year to $52 billion as the company opened branches and consumer- loan offices, unveiled new credit-card incentives and bought smaller companies. On a Jan. 20 conference call with investors, Prince said the pace of spending on new investments would slow in 2005.
Citigroup isn't alone in trying to reduce investment-banking costs. Lazard LLC, a private banking partnership run by Bruce Wasserstein, said in a regulatory filing today that it plans to cut compensation and benefits by $100 million during the next year as the firm prepares to sell shares to the public. Lazard said in the filing with the Securities and Exchange Commission that it wants to bring costs closer to Wall Street rivals.
To contact the reporters on this story: Justin Baer at jbaer1@bloomberg.net; Scott Silvestri in Charlotte, North Carolina at 6589 or ssilvestri@bloomberg.net.
To contact the editor responsible for this story: Erik Schatzker in New York at eschatzker@bloomberg.net
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