Citigroup Inc chief executive Vikram Pandit will cut about 4,500 jobs in coming quarters as he seeks to reduce costs amid slumping revenue and “unprecedented” market conditions.
The lender will take a fourth-quarter pretax charge of about US$400 million tied to the reductions, including severance, Pandit said on Tuesday at an investors’ conference in New York. Citigroup, the third-biggest US bank by assets, employed about 267,000 people as of Sept. 30, according to a filing.
“Financial services faces an extremely challenging operating environment with an unprecedented combination of market uncertainty, sustained economic weakness in the developed economies and the most substantial regulatory changes we have seen in our lifetimes,” Pandit, 54, said. “These trends will likely significantly affect the competitive landscape in the coming years.”
Pandit is cutting staff as the European sovereign-debt crisis persists and banks prepare for regulations on minimum capital levels to take effect, threatening revenue from trading and investment banking. Citigroup said in September it would limit hiring to “critical” jobs to control costs.
Financial firms worldwide have cut more than 200,000 jobs this year, up from about 58,000 last year and 174,000 in 2009. Bank of America Corp CEO Brian Moynihan said the Charlotte, North Carolina-based lender plans to eliminate 30,000 jobs in the next few years.
“For the banking sector, both investment banking and commercial banking, the overhead expenses are too high,” Gerard Cassidy, an analyst at Royal Bank of Canada in Portland, Maine, said in a telephone interview. “The industry needs to do a better job bringing that expense level down to reflect the lower revenues vis-a-vis what they were two or three years ago.”
Pandit is investing in emerging markets, such as Brazil, China and India, which now account for more than half of the bank’s profit. Those economies may expand at 6 percent a year through 2015, eclipsing developed markets, which may grow less than 2 percent, Pandit said.
“Developed economies are undergoing a long period of deleveraging of consumer, financial, corporate and government balance sheets, which will drive slow growth for years,” Pandit said at the conference sponsored by Goldman Sachs Group Inc. “By contrast, emerging-markets growth is expected to continue, fueled by population growth, the rise of a powerful consumer base in the middle class and a growing share of world trade.”
Pandit didn’t say where the staff reductions would occur and Jon Diat, a bank spokesman, declined to specify which countries would see the steepest cuts. Pandit has cut more than 100,000 jobs since he became CEO in December 2007 through dismissals and sales of distressed assets and businesses from the New York-based lender’s Citi Holdings unit.
In related news, Deutsche Bank AG’s head of corporate finance coverage in Japan, Koichiro Yasuda, resigned as the German bank cut about 20 jobs in Tokyo, two people with knowledge of the matter said.
Deutsche Bank, based in Frankfurt, on Tuesday told investment banking staff in Tokyo, including at least three managing directors, that their positions were being eliminated, said the people, who declined to be identified as the matter is confidential. The global banking team in Japan employed about 70 people before the reductions, the people said.
Germany’s biggest lender plans to reduce its headcount by about 500 positions at its corporate banking and securities unit, primarily outside Germany, by March 31, the bank said on Oct. 4.
“The contagion from Europe is spreading to Japan and the rest of Asia,” said Katsunobu Komizo, chief executive officer at recruitment firm Executive Search Partners Co in Tokyo. “More job cuts are likely as Asia’s economy may be hurt when European banks stop lending and sell non-core business units.”
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