Citigroup (NYSE: C) announced it is laying off 11,000 employees, mostly in support functions, pushing the company’s stock up more than 5 percent today.
The financial firm said it was taking a “series of repositioning actions that will further reduce expenses and improve efficiency across the company,” including focusing on 150 cities with “the highest growth potential” and closing 44 retail branches in the U.S.
This was the first major move by Michael Corbat, Citigroup’s new CEO since October, and investors seemed to approve of his decisive announcement, said Daniel Marchon, Raymond James’ equity research associate. He was preceded by Vikram Pandit, who was forced to resign Oct. 16.
“These actions are logical next steps in Citi’s transformation,” Corbat said. “While we are committed to – and our strategy continues to leverage – our unparalleled global network and footprint, we have identified areas and products where our scale does not provide for meaningful returns.” The company said it had 266,000 full-time employees, as of last December.
Although the company said it expects a pre-tax expense of about $1 billion in the fourth quarter and $100 million in the first half of 2013 related to its plans, the cost-savings from layoffs of roughly 4 percent of employees will lead to less than $300 million in a negative impact. Most of the layoffs, 6,200, will occur in the company’s global consumer banking group, followed by 1,900 positions in the institutional clients group. Within those groups, a large number of layoffs are in operations and technology support functions.
While many of the laid-off support staff might think otherwise, Raymond James’ Marchon called it a “strong first step” by Corbat after speculation in the past several months about whether the company would move to reduce expenses. “It’s a good and solid sign to see the new CEO step in, has a vision and is executing it,” Marchon said. Citigroup stock was up 5.22 percent to $36.13 at 11:32 a.m. ET.
In October, Citi reported net income of $3.3 billion for the third quarter, excluding one-time charges, beating analyst expectations. The company had a $4.7 billion charge after selling a part of its business to Morgan Stanley Smith Barney for less than it expected.
Many Wall Street firms are aiming to become leaner, more profitable firms and emphasize revenue drivers. Bank of America last week said it was mulling ways to encourage customers with low-balance accounts to use more of its services.