London May Fall As Citigroup Cuts 17,000 Jobs to Cut Costs & Restructure Operations

Implications: Key Implications:

57% of Citigroup's job cuts will occur in their international offices and 43% of cuts will occur domestically.  Citigroup's middle management and back office employees will be affected the most by the job cuts and about 2/3rds of the jobs will be eliminated through attrition, as Citigroup restructures its operations to save more than $2 billion in 2007 and beyond.  Roughly 8% of Citigroup's 327,000 employees from entry-level consumer bankers to senior executives in the investment bank will be affected by the restructuring.

1.  Approximately 9,500 jobs will be moved to locations overseas or around the U.S., where the costs of doing business is lower than more expensive locations like London, Hong Kong and NY, where Citigroup is headquartered

2.  Citigroup's investors are putting pressure on Charles Prince to cut expenses and focus on revenue growth, which has only grown about 3% year-over-year in the last three years, and Citigroup's U.S. Consumer Division growth has been sluggish, while Citigroup's competitors have realized double-digit growth during the same timeframe


Analysis: Comments/Perspective:

Prince has been criticized by shareholders and Citigroup's single largest  shareholder, Saudi Prince Alwaleed bin Talal, when Prince moved forward with a plan to open more than 1,000 branches last year.  After a 3-month review of Citigroup's operations by Druskin, the Consumer & Credit Card Operations will see the largest number of job cuts and Citigroup's Legal and Compliance Departments will likely experience job cuts too.

1.  During Citigroup's job cuts Prince is also making acquisitions and will acquire Taiwan's BOOC (Bank of Overseas Chinese) for approximately $427 million, to expand its presence in the Asia-Pacific region and once the acquisition is completed, the combined banks will be the largest international bank and the 13th largest among all Taiwan banks by total assets   

2.  Citigroup will also continue to hire employees in emerging markets such as Brazil, China, India and Russia, where exponential growth is expected over the next 10 years.  2007 will be a critical year for Prince to streamline operations, cut expenses and reposition Citigroup for stronger revenue growth and to improve shareholder expectations and return on value