If you're familiar with recent events at Citigroup, you know that the bank is cutting 20,000 jobs. It will also be understood that employees in London have already been notified that there will be job cuts starting next week. But don't be fooled into thinking you know everything.
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When Citi announced 20,000 job cuts last week, it went on to explain how it planned to achieve that. Only a small portion of the savings will be a direct result of the simplification initiatives at the heart of Project Bora Bora.
Citi Chief Executive Officer Jane Fraser told investors on Friday that only 5,000 of Citi's 20,000 job cuts will be at the top level. Under Bora Bora, the bank is reducing its hierarchical complexity, reducing its management layers from 13 to 8. In doing so, we are changing reporting lines to give senior staff more reporting and middle management more autonomy. (outlined here how it works).
The company is rapidly cutting 5,000 people, “mainly in management positions.” Fraser said City's 12,000 managers had already been reduced to 10,800 after four tiers were removed in three stages from the end of last year. Tier 5 cuts are seemingly the most painful. At City, he has cut 5,000 jobs, mostly in management positions, leaving him with 3,800. Once this process is complete, perhaps by the end of the first quarter of this year, the bank will have up to 40% fewer managers than it started with.
But even if it cuts 5,000 management jobs, Citi will need to find an additional 15,000 job cuts to reach a total headcount of 20,000. These 15,000 additional cuts, which will be implemented through 2026, will require a different approach. Fraser said these will consolidate functions, eliminate “stuck costs” for businesses that have already closed, exit from other “marginal businesses” (likely including muni debt and distressed debt trading), and eliminate “core This will be achieved by “optimizing the cost base.” and by increasing automation and efficiency. He said the bank has already eliminated 6% of its traditional platform base and automated 90% of price verification for preferred debt and equity securities.
Another 15,000 job cuts over the next two years will force Citi to dig deeper into its business. Despite pointing out that previous cuts contributed to the bank's dismal performance in the fourth quarter, Fraser said the existing cuts simply removed bureaucracy and had no impact on its revenue stream. He said no. This is still subject to change.
While jobs will be cut, the City will also be spending money. Mason and Fraser said last week that the bank plans to continue investing in risk and management, as well as “transformation and technology.” Therefore, in parallel with the reduction, revenues must increase by 4-5% per year.
Last year, Citi's overall revenue increased 4%, led by transaction services and U.S. retail banking. However, sales fell by 7% in the market and by 15% in the investment banking sector. That's not a good start.
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