Citigroup to hack 17,000 jobs
Largest U.S. bank announces it will cut about 5.2 percent of workforce, but analysts say move could hurt more than help.
By Rob Kelley, CNN staff writer
April 11 2007: 8:01 AM EDT
NEW YORK -- Citigroup announced Wednesday it is cutting 17,000 jobs in the company's first restructuring in ten years, but analysts say the cuts could be the exact opposite of what it needs to grow earnings.
The cuts make up about 5.2 percent of Citi's current workforce of 327,000 full-time employees. Citigroup CEO Charles Prince is under pressure from shareholders to restructure.
The company also said it will move 9,500 jobs to "lower-cost locations."
The biggest U.S. bank faces intense pressure from shareholders to juice its bottom line, as the company's stock has grown only 15 percent since Charles Prince came on as CEO in October 2003. To put that in perspective, its shares price gained 272 percent during the same length of time from 1997 to 2000.
Charles Prince will hold a conference call with analysts detailing the cuts on Wednesday at 8am.
Prince announced last year that he would review the company's five divisions to create a "leaner, thinner" Citigroup. Revenue growth has not kept pace with spending at the company, putting a damper on earnings.
"We undertook this review to create a consistent level of best-in-class expense discipline in every part of our company," said Robert Druskin, Chief Operating Officer, who managed the review process, in a statement. "We did not simply give the entire organization an arbitrary number to cut. Instead, we looked objectively at each of our businesses and functions based on the opportunities we saw, benchmarking them against their peers."
In a statement announcing the job cuts early Wednesday morning, Citigroup said it expects the move to generate savings of $2.1 billion in 2007, $3.7 billion in 2008, and $4.6 billion in 2009. It said it would record a pre-tax charge of $1.38 billion in the first quarter of 2007 related to the cuts.
The company felt pressure from shareholders eager for a return to the high-growth ways of the past, says an analyst.
"Citigroup over the years has built up an investor base with audacious expectations about the returns the company could generate in the future," said Craig Woker, an analyst with Morningstar. "But times have changed - this company is no longer managed by a team that can go out and get growth through cheap acquisitions."
One analyst said that the company's revenue woes began with moves made by earlier CEO Sandy Weill.
"Business by business, Citigroup stripped cash in order to make large acquisitions under Weill," said Dick Bove, an analyst with Punk, Ziegel & Company. "As a result each of these businesses was failing to grow revenue and lost market share."
Citigroup, which has operations in 100 countries, has over 8,000 bank branches and 200 million customers.
Largest U.S. bank announces it will cut about 5.2 percent of workforce, but analysts say move could hurt more than help.
By Rob Kelley, CNN staff writer
April 11 2007: 8:01 AM EDT
NEW YORK -- Citigroup announced Wednesday it is cutting 17,000 jobs in the company's first restructuring in ten years, but analysts say the cuts could be the exact opposite of what it needs to grow earnings.
The cuts make up about 5.2 percent of Citi's current workforce of 327,000 full-time employees. Citigroup CEO Charles Prince is under pressure from shareholders to restructure.
The company also said it will move 9,500 jobs to "lower-cost locations."
The biggest U.S. bank faces intense pressure from shareholders to juice its bottom line, as the company's stock has grown only 15 percent since Charles Prince came on as CEO in October 2003. To put that in perspective, its shares price gained 272 percent during the same length of time from 1997 to 2000.
Charles Prince will hold a conference call with analysts detailing the cuts on Wednesday at 8am.
Prince announced last year that he would review the company's five divisions to create a "leaner, thinner" Citigroup. Revenue growth has not kept pace with spending at the company, putting a damper on earnings.
"We undertook this review to create a consistent level of best-in-class expense discipline in every part of our company," said Robert Druskin, Chief Operating Officer, who managed the review process, in a statement. "We did not simply give the entire organization an arbitrary number to cut. Instead, we looked objectively at each of our businesses and functions based on the opportunities we saw, benchmarking them against their peers."
In a statement announcing the job cuts early Wednesday morning, Citigroup said it expects the move to generate savings of $2.1 billion in 2007, $3.7 billion in 2008, and $4.6 billion in 2009. It said it would record a pre-tax charge of $1.38 billion in the first quarter of 2007 related to the cuts.
The company felt pressure from shareholders eager for a return to the high-growth ways of the past, says an analyst.
"Citigroup over the years has built up an investor base with audacious expectations about the returns the company could generate in the future," said Craig Woker, an analyst with Morningstar. "But times have changed - this company is no longer managed by a team that can go out and get growth through cheap acquisitions."
One analyst said that the company's revenue woes began with moves made by earlier CEO Sandy Weill.
"Business by business, Citigroup stripped cash in order to make large acquisitions under Weill," said Dick Bove, an analyst with Punk, Ziegel & Company. "As a result each of these businesses was failing to grow revenue and lost market share."
Citigroup, which has operations in 100 countries, has over 8,000 bank branches and 200 million customers.
Libellés : Reflections
posted by Jane Doe @ 9:43 PM
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