Morning Coffee: Citi’s $1 Billion Question

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Judging by his initial public comments, Citigroup chief executive Mike Corbat has one key task to complete before any other: cutting costs. Just how big of a piece will he need to cut? At least $1 billion, and that’s just from Citi’s investment banking unit.

The number comes from Financial News’ William Wright, who notes that Citigroup’s banking unit has only cut costs by 3% this year while rival institutions have made double-digit concessions. The group’s cost/income ratio over the last year sits at around 70%, at least five percentage points above what is considered sustainable. The firm will need to cut $1 billion in expenses just to reach that level, according to Wright.

Corbat will likely target several under-performing units within the bank’s bloated investment banking group. The firm’s equities and commodities businesses have performed particularly poorly, says Wright, and could be at risk of seeing their budgets slashed.

Cost-cutting is never popular, as it almost always results in layoffs, but it’s become a key tool in banks getting back on track following the financial crisis. Goldman Sachs has been particularly vigilant in eliminating redundancies and just celebrated a strong third quarter where the average compensation per employee increased 15% from a year ago.

A lean, efficient workforce now appears to be the end goal of every U.S. bank, no matter how many eggs need to be broken.

Does UBS Now Stand for ‘U’ve Been Shed?’ (eFinancialCareers)

It appears that Switzerland’s largest bank, UBS, is about to get a little smaller, shedding as many as 5,000 employees, or nearly 8% of its global headcount. Recruiters say most of the cuts will be in investment banking, M&A and some areas of trading. One bright spot: wealth management.

Hazy Q3 (AP)

SunTrust Banks posted better-than-expected third quarter earnings on Monday, mostly due to a securities gain from the sale of Coca-Cola shares. SunTrust shares tumbled in early morning trading.

Ownership Squabble (WSJ)

The British government is urging the Royal Bank of Scotland to sell its controlling stake in its U.S.-based banking unit, RBS Citizens Financial Group, a move that RBS execs are fighting.

Not a Bad Option (Bloomberg)

Chief Executive Officer Lloyd Blankfein and five other Goldman Sachs execs cashed out nearly $15 million in stock options last week.

‘Small and Discrete’ (Financial Times)

Several veteran dealmakers who have left the struggling i-banking world are creating their own boutique advisors firms, often comprised of just themselves and their secretary.

Gupta Eyeing Rwanda (Financial Times)

Rajat Gupta, the former Goldman Sachs director convicted of insider trading, has asked the judge for a lesser sentence than the eight to 10 years in prison recommended by prosecutors. Gupta, who will be sentenced later this month, is hoping to avoid a prison term by agreeing to perform community service in Rwanda.

Corrupting Bonus Structure (Bloomberg)

The culture at Goldman Sachs turned for the worst when the firm altered its bonus structure in 2005, when the bank opted to pay executives a straight percentage of the revenue they brought in, according to former employee Greg Smith.

Buzz Around the Office

It’s Bad Mood Food (MSN)

A 56-year-old Arby’s manager was fired last week after fighting off a knife-wielding robber and escaping through the drive-thru window. Mary Archer, a 22-year Arby’s veteran, was let go because she violated the fast food chain’s policy by being the only employee in the restaurant.

List of the Day: Moving Forward

Searching for a new job while working full-time is no easy task. Here’s how to pull it off.

  1. Evaluate what you like, love and hate about your current job.
  2. Set a goal to network with four new people each month.
  3. Develop new skills at your current company to make yourself more attractive to other employers.

(Source: The Daily Muse)

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