Citigroup layoffs coming
Financial giant cites integration of businesses, market downturn for job cuts
NEW YORK (CNNfn) - Citigroup said Tuesday it will cut several hundred jobs in its corporate and investment banking operations as it integrates recently acquired businesses and reacts to the economic slowdown that has increased market volatility.|
A Citigroup spokeswoman said most of the cuts will occur in the company's Salomon Smith Barney financial services firm and Citigroup's investment bank, which together employ 60,000 of the company's total work force of 235,000.
The spokeswoman also could not say whether Citigroup, whose CEO Sanford Weil has a reputation for keeping costs strictly in line, would record a charge for the layoffs and related severance in the current quarter.
The spokeswoman declined to provide exact numbers but said the layoffs would likely amount to less than 1 percent of the 60,000 corporate and investment banking work force.
"Most of the jobs are in operations and technology, many the result of ongoing integration," the spokeswoman said. "We've had four mergers in three years, and clearly the layoffs also reflect current market conditions.
"The vast majority of layoffs are part of "restructuring" and are mainly in operations and technology and many of those are the result of continuing integration," the spokeswoman said. "Reductions in headcount reflect current market realities."
The spokeswoman went on to say that several hundred people were notified beginning Monday, the spokeswoman said.
"This is not a surprise. They had hinted they were going to do that that was one of the things they need to do to accomplish double-digit earnings growth," Diana Yates, an analyst with A.G. Edwards & Sons Inc. said. "I would think Citigroup has a lot of potential to cut out some expenses when you look at all the mergers over last couple of years."
However Yates said the number of reductions was likely not large enough to have an impact on the company's stock, and that Citigroup was diversified enough to absorb some of the effects of the slowing economy somewhat better than its rivals.
Employees first learned that layoffs would be coming in an internal memo last week from Michael Carpenter, Salomon Smith Barney's chief executive.
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In the memo, Carpenter said Citigroup's focus must be to continue its forward business momentum "even as we are experiencing a dramatically more challenging business environment."
Carpenter said the marketplace has seen a "significant slowing in M&A (mergers and acquisitions) activity and equity underwriting," increasing credit problems for large companies, a marked slowing in individual investor activity and volatile secondary markets.
"On the one hand, we have assembled an extraordinary platform to serve our clients and we must continue to invest in building the franchise out to its full potential," Carpenter said. "On the other hand, we must respond to unfavorable market conditions by being extraordinarily disciplined about the management of our headcount and expenses."
Citigroup is still in the process of integrating its Salomon Smith Barney unit with the investment bank unit of Schroders, which it agreed to buy for $2.2 billion in January 2000 in a deal that closed last May.
The move makes Citigroup the latest in a wave of financial firms to cut staff as the economy slows. In the last few months discount broker Charles Schwab Corp. (SCH: Research, Estimates), Wall Street firm Bear Stearns Cos, Inc. (BSC: Research, Estimates) and online brokers Ameritrade Holding Corp. (AMTD: Research, Estimates) and CSFBdirect Inc., a unit of Credit Suisse Group, have all cut staff to save money.
Citigroup's (C: Research, Estimates) shares ended down $2 Tuesday at $43.70.
Brokerage firms have begun to issue quarterly earnings warnings citing market volatility sparked by the recent economic downturn. The most recent of these was American Express (AXP: Research, Estimates), which warned Monday that it would miss first-quarter forecasts.
The Federal Reserve has aggressively cut interest rates three times since January in a bid to keep the U.S. economy out of recession.
However, jittery investors have sold off stocks opting for safer havens, and the reduced activity from individual and corporate investors has taken its toll on the financial services companies that manage such transactions.
American Express stock was also active last week after rumors that Citigroup was seeking a merger with its rival firm.
From staff and wire reports