(Source – PYMNTS.com)
In a strategic move to enhance its financial performance, Citigroup Inc. (C) has revealed plans to eliminate approximately 20,000 job positions, excluding its workforce in Mexico, over the medium term. This decision follows the company’s announcement of a net loss of $1.8 billion for the fourth quarter of 2023. The restructuring initiative aims to yield savings of approximately $2-$2.5 billion over the medium term, positioning Citigroup for improved future results.
For the year 2024, Citigroup anticipates adjusted expenses to range between $53.5 billion and $53.8 billion, a decrease from the previously projected $54.3 billion. This reduction is attributed to benefits from organizational simplification, the exit from various international businesses, and the elimination of non-viable segments such as municipal business and a subset of distressed debt trading. These cost-saving measures will be partially offset by increased investments in risk and controls.
Raise severance costs and incur additional expenses
The overhaul includes the layoff of around 5,000 employees in managerial positions, which is expected to raise severance costs and incur additional expenses ranging from $700 million to $1 billion. This is factored into the company’s overall expense guidance for 2024. As part of the restructuring, Citigroup Inc. aims to streamline its management layers from 13 to eight, with the optimization of the first four layers expected to be completed by the end of the month. The organizational simplification initiative is set to conclude by the end of the first quarter of 2024, resulting in a net reduction of approximately 1,500 managerial positions.
Citigroup Inc. believes that these optimization efforts will lead to reduced bureaucracy, enhanced accountability, and a faster decision-making process, ultimately contributing to increased client satisfaction.
While the restructuring incurs certain costs, Citigroup’s focus on its core strengths and ongoing business transformation initiatives are expected to help the company navigate a challenging operating environment. Notably, the completion of divestitures of nine of its 14 international consumer franchises by the end of 2023, coupled with winding down almost 70% of retail loans and deposits in Russia, Korea, and China, showcases the company’s commitment to reshaping its operations.
Citigroup’s strategic moves also extend to divestitures, with its China-based onshore consumer wealth portfolio being sold to HSBC Holdings plc (HSBC) in progress. This transaction is set to transfer assets under management and deposits worth approximately $3.6 billion to HSBC, with the deal expected to conclude in the first half of 2024.
Citigroup Inc. To cut 20,000 Jobs in Next 2 Years, CEO Calls it “Turning Point”
BlackRock remains optimistic about its growth prospects
Looking ahead, Citigroup has restarted its sales process in Poland and is on track to execute an IPO for its Mexico business in 2025. These initiatives, along with efforts to expand operations, position the company for potential top-line growth in the upcoming period.
In the past three months, Citigroup’s shares have shown resilience, rising by 28.5%, outpacing the industry’s growth of 19.3%. As of now, Citigroup Inc. holds a Zacks Rank #3 (Hold), indicating a balanced outlook. It remains to be seen how these strategic measures will shape the company’s trajectory in the dynamic financial landscape.
In a similar move, last week, BlackRock, Inc. (BLK) announced plans to eliminate 600 job positions, constituting approximately 3% of its global workforce. Despite this reduction, BlackRock remains optimistic about its growth prospects, with plans to expand specific areas of its business, and anticipates increased employment by the end of 2024.
