[NEW YORK] Citigroup will resume job cuts starting this week, joining rivals such as Wells Fargo & Co in ending an earlier pledge to pause staff reductions during the coronavirus pandemic.
The cuts will affect less than 1 per cent of the global workforce, the bank said Monday in a statement. With recent hiring, overall headcount probably won't show any drops, Citigroup said.
The reductions will come as Citigroup is facing a likely revenue drop and another increase to loan-loss reserves this quarter as the pandemic drags on, as well as years of expenses to improve risk controls. The Office of the Comptroller of the Currency (OCC) and the US Federal Reserve (Fed) are weighing public reprimands of the firm because of continued deficiencies in its infrastructure and control functions, people familiar with the matter said earlier on Monday.
"The decision to eliminate even a single colleague role is very difficult, especially during these challenging times," Citigroup said in the statement. "We will do our best to support each person, including offering the ability to apply for open roles in other parts of the firm and providing severance packages."
The bank said it has hired more than 26,000 people this year, and over one-third of those jobs were in the US. The lender had roughly 204,000 employees at the end of the second quarter.
Banks have resumed job cuts in recent weeks after pledging, en masse, to pause such actions earlier this year. Many firms are pushing to cut costs as the pandemic has dragged on, threatening lenders with higher credit costs and crimping revenue growth.
Chief financial officer Mark Mason said Monday that the bank is hoping to keep expenses flat to slightly up this quarter as persistently low interest rates and a slowdown in consumer spending have weighed on the bank's results.
While revenue from fixed-income and equities trading is likely to climb by a percentage in the low double digits in the third quarter, firmwide revenue will probably still fall, Mr Mason said. The lender will also likely have to set aside more in reserves to cover potential losses in the third quarter.
Citigroup shares dropped 5.6 per cent to US$48.15 in regular New York trading, the worst performance in the 66-company S&P 500 Financials Index.
The bank has been investing more in improving its infrastructure and control functions after spending roughly US$1 billion on such efforts this year. It is in discussions with the Fed and OCC over improving those functions.
"While we never comment on our discussions with regulators, we are completely committed to improving our risk and control environment," Citigroup said in a separate statement on Monday. "We recognise that we are not yet where we need to be and that has to change. We have thus redoubled our efforts and have made improving our risk and control environment a strategic priority."
Still, the looming regulatory hurdle accelerated the timing of chief executive officer Michael Corbat's announcement that he would step down next year. Mr Corbat wanted fresh leadership installed ahead of announcing what could be a years-long remediation process to satisfy regulators, according to the people.
The bank will offset investments in better governance with plans to reduce its real estate footprint and by moving some employees to less-expensive cities and offices.
"I cannot emphasise enough, there is no greater priority for the entire management team than getting to what we would characterise as a best-in-class risk and control environment," Mr Mason said.