Amid tough times, Citibank to cut 4500 jobs
US banking giant Citigroup, led by Indian-American Chief Executive Vikram Pandit, is set to lay off about 4,500 employees over the next few months to cut costs amid tough economic times.
Some of the job cuts, representing 1.7 percent of the group’s total global headcount of 267000 as at the end of September, would be from the firm’s proprietary-trading operations as regulators seek to restrict banks from betting shareholder cash, Pandit said Tuesday.
As a result, Citi will book a charge of approximately $400 million in the fourth quarter of this year due to severance payments and other expenses associated with the layoffs, he said speaking at the Goldman Sachs Financial Services Conference in New York.
“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 said.
“These trends will likely significantly affect the competitive landscape in the coming years.”
Citigroup posted a 74 percent increase in third-quarter profit, aided by a $1.9 billion accounting gain that softened the impact of lower trading and investment-banking revenue. Excluding the accounting figure, the bank’s revenue for the period fell 8 percent to $18.9 billion.
Most of that accounting gain stemmed from a credit- valuation adjustment, or CVA. This required Citigroup to write down the value of its debts amid a widening of the bank’s credit spreads, the extra yield investors demand to own a corporate bond rather than US Treasuries.
The spreads have tightened this quarter, Pandit said. If the fourth quarter ended yesterday, the bank would post a $200 million negative CVA, compared with a $1.9 billion gain in the previous quarter.
Citigroup’s lending business in its securities and banking operation also would record a loss of about $300 million tied to hedges if the quarter ended yesterday, Pandit said.
