Citigroup to cut costs by cutting jobs
KAI RYSSDAL: Citigroup made $5.1 billion last quarter. A tidy sum. But well short of the $6.9 billion it made the quarter before that. So, in a couple of weeks, the country’s biggest financial services company will present a major restructuring plan. The idea, of course, is to cut costs and increase those profits. But details, of course, have already leaked.
Today the Wall Street Journal reported that it could involve as many as 15,000 job cuts. Marketplace’s Alisa Roth has more from New York.
ALISA ROTH: Citigroup will present its official plan sometime next month. But it will reportedly cut or move as many as 15,000 jobs in expensive cities like New York, London and Hong Kong. Speculation is the plan could save the company as much as a billion dollars.
It’s just as well. It’s been criticized recently for having operating costs that are bigger than revenue growth. Richard Bove is a strategist at Punk Ziegel.
RICHARD BOVE: This is a company where for a decade they have underinvested in their core businesses. And because they’ve underinvested in their core businesses, their revenues are not growing and they’re losing market share.
He says Citigroup spends too much on acquiring other companies and not enough on building the businesses it has.
But analyst Jeff Harte at Sandler O’Neill says Citigroup has been doing just fine:
JEFF HARTE: They’ve been making a lot of investments that needed to be made. If anything, they have kinda been making up for what appears — in hindsight — to have been years of underinvestment.
Meanwhile, the company says it expects much of its future investment to be overseas. That’s what the company’s CEO told employees in India today. Citigroup is one of the largest foreign banks there, and Citigroup will likely continue to increase both its retail presence and outsourcing operations.
Doing more work in India will save money with labor costs. But Richard Bove says there’s another benefit to a big presence in what will be the world’s largest country:
BOVE: If you can grow with the Indian population and with the wealth of the Indian population, you have enormous opportunity.
Citigroup is also expected to take jobs to cheaper cities in the U.S. such as Buffalo and Cincinnati.
In New York, I’m Alisa Roth for Marketplace.
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