Morning Coffee: Citi’s Corbat Speaks Softly, But Swings a Mighty Sword
When Michael Corbat was named chief executive at Citigroup, the writing was on wall. Cost-cutting was inevitable, and everyone knew it. But few imagined his blade was this sharp.
Citigroup will slash more than 11,000 jobs, including almost 2,000 in its institutional clients group, made up of trading, transaction services and bloated investment banking units. Corbat will also target Citi’s consumer banking group and equities business.
The cuts, representing more than 4% of the bank’s workforce, will likely be spread fairly evenly across the globe, with even top performing markets like Hong Kong and Brazil feeling the pinch, according to The Wall Street Journal. Citi will also exit several emerging markets.
The move could save Citi nearly $1 billion, helping the firm reduce its cost/income ratio of 70% to a more sustainable level.
The question that remains is whether the 11,000 job cuts will be enough to quench Corbat’s thirst for efficiency. Bloomberg estimated at the time of Corbat’s promotion that Citi will need to cut roughly 35,000 jobs – or more than 13% of its workforce – to reach the productivity levels of a Wells Fargo or Bank of America.
Corbat will likely wait to see if Citi can increase its efficiency with a pared down workforce. The bank generated just over $200,000 in revenue per employee through the first three quarters of 2012, a paltry number compared to its closest competition.
Russian Emigration (Bloomberg)
Credit Suisse is reportedly relocating its Russian capital-markets and advisory businesses from Moscow to London to cut costs. No word yet on potential layoffs.
Only 200 of the roughly 28,000 MF Global customers who saw their assets vanish when the firm collapsed have yet to have their claims processed by the appointed trustee. Commodity customers likely won’t get paid in full though.
Investors Reaping Benefits (Bloomberg)
Sometimes it’s difficult to acknowledge that cost-cutting at banks, while often painful for employees, can quickly make a firm more solvent. Bank of America, which aims to cut roughly $8 billion per year over the next half-decade, has seen its shares grow by 82% in 2012.
Massive Shortfall (Financial News)
Global banks are roughly $619 billion short of meeting new capital requirements. European banks account for around half the deficit.
Home Court Advantage (Financial News)
The U.S. mutual fund market appears generally unfriendly to new asset managers, particularly those that reside overseas. The only real hope for newbies is to embrace non-mainstream strategies.
France Adding U.S. Talent (Reuters)
French banks like BNP Paribas and Societe Generale, which had to slash U.S. staff during the financial crisis, are quietly adding headcount as the market stabilizes.
A Sinking Ship? (Business Insider)
Morgan Stanley and now Citigroup have reportedly advised clients to steer clear of SAC Capital Advisors, despite assurances from SAC founder Steven Cohen that the firm will rise above insider trading accusations.
Buzz Around the Office
Not many people are finding joy in the impending fiscal cliff. If only we could see it through the eyes of a 22-month-old.
List of the Day: It’s Offer Time
Before you accept that offer, ask these questions.
- Am I eligible for a bonus?
- Do you reimburse for work devices?
- Can I review the benefits package?