NEW YORK—Citigroup Inc. on Wednesday said it will eliminate 17,000 jobs, or about 5 percent of its workforce, in a broad restructuring designed to cut costs, boost profit, and bolster a lagging stock price.
An additional 9,500 jobs will move to lower-cost locations worldwide, including two-thirds through attrition, meaning 8 percent of the bank's 327,000-person workforce will be affected.
Consumer banking, Citigroup's largest unit, will be hardest hit, followed by corporate and investment banking. Citigroup said most of the job cuts will take place this year.
The changes mark the first companywide restructuring since Citicorp and Travelers Group merged in 1998 to form Citigroup. They follow an expense review begun in December by Chief Operating Officer Robert Druskin.
Shareholders have pressured Chief Executive Charles Prince to slash expenses even as the bank tries to grow, especially outside the United States. Operating expenses soared 15 percent last year to $52 billion, while revenue rose just 7 percent.
"Druskin has a credible plan, and it looks like Chuck Prince bought himself 12 to 24 months to get the business in order," said Michael Holland, a money manager at Holland & Co.
Last summer, Saudi Prince Alwaleed bin Talal, Citigroup's largest individual shareholder, called on the bank to make "draconian" cuts.
Citigroup said its workforce will grow this year, but more slowly than in the past, because of acquisitions, branch openings and investments.
About 1,600 jobs will be cut in New York City, where Citigroup is based. Some Smith Barney brokerage offices nationwide will close.
Citigroup shares fell 27 cents to $52.13 in morning trading on the New York Stock Exchange.
"Tough-Minded"
The companywide cuts primarily affect middle- and back-office operations, rather than client-facing staff. They will involve eliminating layers of management and some corporate offices, and simplifying technology platforms.
"You will see a more efficient, more tightly managed, and a more tough-minded Citigroup than you've seen in the past," Citigroup's Prince said on a conference call.
Druskin said 43 percent of the job cuts and 55 percent of savings will be in the United States, and the rest elsewhere. Citigroup operates in about 100 countries.
"We know where every head is coming from, we know where every dollar is coming from," Druskin said in an interview. He added that the bank loses about 20,000 workers a year through attrition.
"There remains skepticism because Citigroup has long promised positive operating leverage and hasn't delivered." said Thane Bublitz, an analyst at Thrivent Financial for Lutherans in Appleton, Wisconsin, which invests $70 billion. "I think the cuts were sufficient."
Charges
The bank will take a $1.38 billion pre-tax charge, or $871 million after taxes, in the first quarter, including about $1 billion for severance. It expects $200 million of additional pre-tax charges this year.
Total pre-tax savings will be about $2.1 billion this year, $3.68 billion in 2008 and $4.58 billion in 2009.
"The savings were a little larger than expected, but the key is execution," said Mark Batty, an analyst at PNC Wealth Management in Philadelphia, which invests $54 billion.
Merrill Lynch & Co. analyst Guy Moszkowski said the savings could add 27 cents to 2007 profit per share.
Analysts on average expect profit of $4.51 per share, Reuters Estimates said. Citigroup trades at 11.6 times expected profit. Bank of America Corp. and JPMorgan Chase & Co. carry respective 10.4 and 11.9 multiples.
Citigroup said the consumer banking cuts may generate $650 million of savings in 2007 and $1.23 billion in each of 2008 and 2009.
It expects corporate and investment banking savings of $400 million this year and $500 million in each of 2008 and 2009, and wealth management savings of $175 million this year and $150 million in both 2008 and 2009. Expected savings include $2 billion in 2009 from improved technology efficiency.
"The key question is, are these expense savings going to make Citi better at innovation, which is key for growth," said Joseph Dickerson, an analyst at Atlantic Equities in London.
Through Tuesday, Citigroup shares have risen 15 percent since Prince became chief executive in Oct. 2003, compared with a 29 percent gain in the Philadelphia KBW Bank Index.
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