Citigroup to Take $900-Million Charge, Cut 10,400 Jobs in Restructuring
Ending months of speculation, Citigroup Inc. released details Tuesday of the human and monetary costs of consolidating its diverse empire of financial services.
Citigroup said that 10,400 people, or 6.5% of its work force, will lose their jobs as overlapping operations are cut. Analysts had been expecting about 8,000 job cuts.
About 35% of the cuts, or 3,600 jobs, will be made in the United States.
Citigroup also said the restructuring will take a huge $900-million bite out of its profit, most of which will be taken in the fourth quarter.
The announcements Tuesday marked the first time the company assigned specific numbers to its restructuring program. Ever since the merger of Citicorp and Travelers Group was completed in October, speculation has been mounting over how much the company’s consolidation efforts would cost.
The merger brought together a major bank, Citibank, and the huge insurance and securities operations of Travelers Group, which includes the Salomon Smith Barney brokerage house. Both companies had significant corporate accounts, leading to overlap in some areas.
When the merger was first announced in April, Citigroup said it expected to add about $1 billion to its bottom line during the next several years, mainly from higher revenue.
But the restructuring program detailed Tuesday signals that the company also will have to rely heavily on cost savings in addition to revenue growth in order to boost profit.
Wall Street’s reaction was positive. Citigroup’s shares rose $2.69, or 6%, to close at $48.75 on the New York Stock Exchange.
The cost-cutting efforts are expected to save the company about $680 million in 1999 and $975 million in 2000.
Citigroup expects just over half of its savings in 2000 to come in the more profitable consumer side of the business, which prompted concern from some analysts.
The company hinted that fourth-quarter earnings also will be hit by investment and trading losses, as they will be at virtually every international bank.
In the third quarter of this year, Citigroup had a loss of $336 million from its corporate businesses, but a 9% gain in income from its consumer business.
Even so, Citigroup is cutting jobs in its consumer operations, including call centers and other back office functions worldwide, as well as in management, sales and marketing. Citigroup said it expects additional savings by more tightly managing the use of outside consultants and travel.
At the same time, Citigroup said it will beef up its U.S. credit card call centers to exploit opportunities to market insurance products to its credit card customers.
